An in-depth look at the algorithm mechanism of information flow advertising: one formula applies to the entire industry!

The bid has reached more than two hundred, but why is it not exposed yet? !

I was able to run over 50 miles yesterday, why did I suddenly run no miles today?

What should I do if the new plan performance is too low?

The above problems are all caused by not understanding the internal algorithm mechanism. What is the algorithm mechanism?

The number of times, before and after, and placement of ads in information flow will vary depending on the information that visitors browse, so the measurement standard for information flow ads is display effect ads based mainly on ECPM.

ECPM determines whether an ad can be displayed in front of visitors and its display position . This indicator can explain the question of “why I see competitors’ ads every day but not my own”.

1. Smart Bidding

Before we delve into the algorithm mechanism, we need to first understand smart bidding. Smart bidding is the most important customer acquisition and bidding method in the information flow industry.

Smart bidding includes ocpc, ocpm, ocpa, and cpa, which are all bidding methods automatically optimized by the system based on conversion conditions . They are generally divided into two stages. The first stage is the data collection stage, following normal cpc/cpm bidding, and the second stage automatically floats the bid based on conversion traffic. (Some platforms have cancelled the first stage, but they will still have the first stage by default)

For example, 1, 2, 3, 4, 5, you target 5 visitors, CPC will bid for each visitor evenly, no matter which visitor converts well. If 2 and 3 convert, OCPC will help you find similar groups of people based on the tags of 2 and 3, and increase the bid. 1, 4, 5 will lower the bid.

The traffic distribution mechanism is mainly: CPM>CPC>OCPM>OCPC>CPA . So how are the bidding rankings among different bidding methods determined?

2. Bidding ranking for different bidding methods

1. CPM (full name: Cost per million) is paid per thousand impressions. CPM is a type of paid display advertising. As long as the advertiser's advertising content is displayed, the advertiser will pay for it.

eCPM = CPM bidding

For example: Ad A, the bidding method is CPM, and the bid is 9, then its eCPM is:

eCPM=9

2. CPC (full name: Cost per click) is charged by click. CPC is a pay-per-click advertising, and charges are based on the number of times the ad is clicked.

eCPM = estimated click-through rate * target click bid * 1000

For example: Ad B, the bidding method is CPC, the bid is 0.89, and the estimated click rate is 0.9%, then its eCPM is:

eCPM = 0.9% * 0.89 * 1000

=8.01

3. oCPM bidding (target conversion bidding)

eCPM = estimated click-through rate * estimated conversion rate * target conversion bid * 1000

For example: Ad C, the bidding method is OCPM, the second-stage bid is 78 (OCPM does not have the first stage), the estimated click rate is 1.2%, and the estimated conversion rate is 1%, then its eCPM is:

eCPM = 1.2% * 1% * 78 * 1000

=9.36

The oCPM and oCPC bidding rankings here are the same, and the above three formulas must be kept in mind.

3. Billing methods for different bidding methods

1. CPM

Impression billing = next eCPM + 0.01

2. CPC

Click billing = next person's CPC * next person's click rate / own estimated click rate + 0.01

Simply put, the lower the click-through rate of the next person or the higher your click-through rate, the less money you spend. We further optimize this formula:

Click billing = next eCPM / (own estimated click rate * 1000) + 0.01

3. oCPM bidding (target conversion bidding)

Impression billing = next eCPM + 0.01

The target conversion bid oCPM is charged based on ad impressions and has nothing to do with whether the ad is clicked.

4. oCPC bidding (target conversion bidding)

Click billing = (next eCPM + 0.01) / (own estimated click rate * 1000)

oCPC is charged based on ad clicks and has nothing to do with how many times the ad is displayed.

Note: The estimated click-through rate is cyclical. It changes with the estimated conversion rate all the time, so it is recommended to use the click-through rate of a whole day or a long period of time to calculate.

Some students may ask: Which bidding method is suitable for new accounts? This needs to be determined based on the budget and content channels, which we will discuss later.

Finally, some words

Only by understanding the core algorithms can you seize the initiative. I hope that this article can help information flow practitioners gain a relatively clear understanding of the internal mechanisms of advertising exposure, and truly achieve “prescribing the right medicine for the right disease and curing it with the right medicine”, and ultimately achieve the goal of attracting a large number of target consumers!

You must understand that only by properly controlling the exposure can you be the upstream source for subsequent high clicks and high conversions! Only through real user and data feedback can we continuously optimize our delivery methods.

Author: Pei Jia

Source: Pei Jia