VK Ads is a targeting advertising platform that allows you to run promotion on the social networks VKontakte and Odnoklassniki, on VK projects and on the advertising network.
One of the main technologies of VK Ads is auction.
What is it? Imagine that at one moment hundreds of advertisers want to show their ads to the same people. The task of the system is to balance the needs of advertisers with the needs of VK users, that is, to determine which ad will be seen by each person. To do this, the auction principle is used: the system selects the most relevant content for the user.
How it works
When creating an advertisement, you select the audience and set the budget of the advertising campaign. The budget can be either daily or total for the entire duration of the campaign.
At the moment when a user opens the platform where the ad is placed, the system instantly conducts an auction among all ads that are targeted to this user, and selects the advertiser whose ads show higher results compared to those of competitors. The auction works according to the eCPM model: this metric allows the system to compare the effectiveness of ads with different target actions (impressions, clicks, events, etc.).
The winning advertiser pays the previous advertiser's bid for displaying the ad. This is called a second-price auction. It helps you spend your ad budget more efficiently without overpaying for impressions.
What is eCPM and how to calculate it
eCPM (Effective Cost Per Mille) is the effective cost per 1000 impressions. The higher the eCPM, the more often ads will be shown to users. eCPM is calculated depending on the advertising goal: different target actions will have different "summands" inside the eCPM formula.
Let's break down the main components that we will use in the formulas.
Auction bid is a potential bid per 1000 impressions, per click or per target action, which is assigned by the "smart model" based on various factors, such as historical data on the clickability of the ad, its conversion into a target action.
CTR - clickability of a particular ad participating in the auction. CTR is calculated using the formula CTR = clicks / impressions * 100%. The clickability of an ad is predicted by ML-model.
CR to target action - conversion rate of a particular ad. It is calculated by the formula CR = target action / clicks * 100%. The target action can be any selected action (subscription to the community, left lead, adding a product to the cart on the site, purchase, installing a mobile application, etc.). The probability of a target action is predicted by the ML model.
Let's take a look at how eCPM is counted for the main advertising targets available in the VK Ads.
- If we choose the target action Impressions, then
еCPM = bid in the auction - If we select Clicks as the target action, then
eCPM = bid in the auction x CTR x 1000. (i.e. in addition to the bid, the potential clickability of the ad is taken into account.) - If we choose as a target action a subscription to a community, a lead left, adding a product to the cart on the site, a purchase, installing a mobile app, etc., then
eCPM = auction bid x CTR x CR to target action x 1000 (i.e. the auction bid, ad clickability and conversion rate to your chosen target action are taken into account).
The initial estimate of CTR and CR is given by the ML model and is made up of historical data on the purpose of advertising and targeting in your business category. After getting enough first conversions, the model starts to take into account the actual performance of the ads you run.
This means that if you are targeting something other than display ads, you should aim to increase your CTR and CR metrics to win the auction and get targeted actions at a lower cost. High clickability and conversion rates to a targeted action show that the ad is interesting and relevant to the selected user segment, so the promotion shows that particular ad.
We recommend using a test period of promotion and after it select the most effective by CTR and CR ads for further promotion.
How bid strategies affect the auction
At the stage of creating an advertising campaign, you can choose between two bidding strategies, which will help the auction realize your budget more efficiently.
Let's consider each of them in detail:
- Limit price strategy - allows you to specify the desired maximum cost of the target action, but does not guarantee its fulfillment. That is, the auction will be able to show your ad only if the estimated cost of winning the auction is less than or equal to the marginal price.
- Minimum price bidding strategy is a strategy in which you specify your daily budget, and VK Ads algorithms strive to provide the maximum number of conversions within the assigned budget. That is, you will be able to win auctions with any display cost, while the system will aim for the minimum. The daily budget will not be exceeded.
This setting is recommended as it allows you to get more conversions within the daily budget due to the freedom of purchasing variations.