What does the term "ad auction" refer to?

The term "ad auction" refers to the mechanism by which platforms like Meta determine which ads to display to users. This process is not simply about bidding; rather, it considers multiple factors. The ad auction evaluates the bid amount submitted by advertisers but also takes into account the quality of the advertisement and its relevance to the target audience.

When an ad is set to be displayed, the auction runs to determine which ads will win the available impressions. Higher bids may increase the chances of winning, but if an ad is of low quality or not relevant to the audience, it may still lose out to another ad with a lower bid but a better overall score when factoring in relevance and quality. This multi-faceted approach ensures that users see ads that are not only paid for but also valuable and pertinent to their interests, ultimately enhancing the user experience on the platform.

This understanding highlights the importance of creating high-quality and relevant ads that resonate with the target audience, reinforcing why ad quality and relevance are critical in the auction process.