Every time an impression becomes available, Meta runs an auction among eligible ads, scoring each on a combination of the advertiser's bid, estimated action rate (the likelihood the person will engage or convert), and ad quality. The ad with the highest total value, not necessarily the highest bid, wins the impression — a design meant to reward relevant, well-performing ads over simply outspending competitors.
This is why two advertisers targeting the same audience with the same budget can see very different CPMs: the one with better ad relevance and estimated action rate pays less to win the same impressions, which is a core reason creative quality directly affects cost efficiency.
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