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Comment by alexpotato | Hacker News Reader

My understanding of how FB advertising worked as the following:

1. You purchase ads on FB

2. You tell FB how much a conversion is worth to you (let's call that $W)

3. You link your site to FB (via a pixel etc) so that they can automatically measure conversions. They say this is for you so that you can see which ads are actually working.

4. In reality, FB now knows what a conversion is worth to you so they can keep upping the price per ad till it gets as close to $X as you can take before you stop advertising.

If ATT is in play now, FB doesn't know the conversion rate and then can't tell how much to "squeeze" you by raising the price.

That would therefore incentivize them to figure out other ways to figure out that rate otherwise how can they maximize advertising revenue if they can't squeeze you?

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Honestly, I'm not sure how to say this politely, but your argument does not map to my understanding of how FB ads worked (I was there from 2013-18, predominantly working on ads).

Steps 1-3 are correct, step 4 is not.

What actually happened is that you'd say I want to spend $10 on FB ads. There's a system called pacing that reduces your bid most of the time so that you don't run out of budget before the end of the day.

Separate to this, FB estimated how likely a user was to click/convert on your ad, and multiplied your bid by this probability (times 1000). This number was used to rank your ad against other ads/content.

So, what would actually happen is that you'd see amazing performance on that $10 budget, and you'd be like FB rocks spend all the money. Unfortunately, because of the way the above worked, when you 10xed the budget it would all far apart.

If FB had actually wanted to maximise short term revenue they might have behaved like you said, but the reason they've made so much money over the years is that they were always much more focused on the longer-term revenue.

Fascinating. Hadn’t thought about the pacing factor.

So given this is the case, how does any advertiser scale up their spending without getting disillusioned and abandoning FB ads?

If you think about it as a diminishing returns curve, it becomes something that can be understood and explored. Of course, the sales people will try to get you to expand quickly and your most efficient spend will come first - after your inflection point, your incremental return will decrease.

However, fighting that pull is the optimization opportunities enabled only at scale. If I run 1 ad, I know how that performs. If I run 1000 ads, I know which ad performs best.

So what I used to tell people to do was to slowly incremente their budget and measure performance at each step. It's kinda stupid, but it worked.

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