How the LinkedIn Advertising Auction Works

March 21, 2017

You understand advertising and generally get how auctions work. But marrying the two in the digital realm—advertising and auctions—can be a little confusing.

You might ask: What are you bidding on? How do you win a digital auction? What does any of this have to do with advertising?

LinkedIn advertising auctions make it easy to amplify your message to people you want to reach, on your terms and your budget. But before diving in with a raised paddleboard, we’ll detail how everything works to help you get the most bang for your bid.

The Auction Ecosystem

Like in traditional advertising, there are three stakeholders with LinkedIn Advertising Auctions—the advertiser (you), the professionals you’re trying to reach (certain LinkedIn members) and the platform you’re using to reach them (LinkedIn). Our goal is making the auctions fair and efficient for all stakeholders.

Whenever a LinkedIn member scrolls through the news feed, we run an auction. A campaign that has won an auction for that particular audience will have its ad appear in the feed, whether on desktops, smartphones, or tablets.

During the campaign setup, Campaign Manager will suggest a bid range based on the target audience and daily budget you’ve selected. The suggested bid range will be higher for audiences that are in demand and that many people are bidding on.

You can bid per click (CPC) or per thousand impressions (CPM), depending on your campaign goals. Go for impressions if your goal is broad awareness, while clicks are best for driving leads. You can find more LinkedIn bidding strategies and answers to common questions here.

Bidding on LinkedIn advertising products works as a second-price auction. That means if you win your bid, you only pay the minimum needed to beat the second-place bidder, no matter what you set as your maximum bid.

There’s another critical wrinkle to LinkedIn advertising auctions: your relevance score. Auctions aren’t just about how much you’re willing to pay. As a members-first organization, we want to show content LinkedIn members are interested in seeing and engaging with. That’s why each update is assigned a relevance score—invisible to all users—that measures how engaging a given update is for the targeted audience. The score is calculated through a combination of click-throughs, comments, likes, shares, and other feedback.

So, to bring it all together, the winner of a given auction is determined by multiplying the bid by the relevance score. “Company A” might have a lower bid than “Company B,” but wins because the relevance score of its post is considerably higher than “Company B’s” post. In the end, “Company A” will only pay a penny more than Company B would have paid.

The takeaway: For best results, aim to create a quality experience for your target audience.

Get the Most Out of Sponsored Content

Organic and paid content work together in the LinkedIn feed. While those who follow you will see your post in their feed, LinkedIn Sponsored Content lets you take your best-performing organic content to a wider, targeted audience.

Before you give content a paid boost, it’s important to know the type of content resonating with your organic audience. It’s also vital to understand your buyer persona. That is, you should have a generalized view of your ideal customers and how they might make a purchasing decision. It may make sense to segment your audience by industry, job functions, or experience so your content speaks to specific pain points or motivations.

LinkedIn offers a spectrum of targeting options. It’s tempting to zero in with an incredibly specific subset, but if the audience is too small, your campaign may not generate enough data to fully optimize your campaign performance.

On the other side, too large an audience may sacrifice relevance. The sweet spot is a sizable audience targeting only your most valuable potential customers.

Tips for Maximizing Your Campaign Results

Budget management is just as important to your success as budget size. Here are a few suggestions to help you get better results:

  • Don’t set daily budget caps below $150: Part of long-term success with LinkedIn advertising is continual evaluation and improvement. Setting your daily cap too low can result in too few clicks to give you the optimization data you need for the next day. You can always adjust your daily caps lower later on.

  • Frontload your daily budgets: Set your daily budgets higher earlier in the month or quarter to generate more activity and collect data. Then you can capitalize on the data, optimize your campaign and do more with less at the end of your time frame.

  • Keep your budget, change your strategy: For awareness campaigns, it makes sense to gradually work through your budget over time. But if you have a time-sensitive offer, there’s no reason to take it slow. Consider ditching your daily cap and, instead, devoting your entire budget to a quick flood. By setting a total budget limit instead of a daily cap, you’ll stay within your campaign budget, but maximize your daily reach.

Log into LinkedIn Campaign Manager to start your Sponsored Content success story.