When you are creating an ad on Facebook, you are provided with a "suggested bid" range (e.g., $0.90 - $2.15 USD). According to this page:
The suggested bid range is there to help you pick a maximum bid so your ad will be successful. It’s based on how many other advertisers are competing to show their ad to the same audience as you are.
I'm interested in understanding what's actually going on (technically) under the hood here.
Say a user logs into Facebook. On the server-side, it the HTTP request that the user's browser sent (as part of the login) is handled, and the server needs to figure out which ad to display back to the user.
I assume this is where the "bidding" system comes into play? Say that, based on this user's demographics, and based on the audience targeting that several competing advertisers designed their campaign with, let's pretend that Facebook sees a pool of 20 different ads it could return.
How does this bidding system help Facebook determine which of the 20 ads it returns to the client-side? I'm guessing that advertisers who "bid more" get prioritized over those who "bid less". But when does this bidding take place? How often does an advertiser need to re-bid? How long is a bid binding for?
Once I understand these usage-related concepts behind ads, it will probably be obvious between which of the following "selection strategies" the backend is using:
- Round robin
- Prioritized round robin
- Randomized (doubtful)
Thanks to anyone who can help point me in the right direction and explain what these suggested bid systems are and how they work.