Bid Smartly: Defining Key Terms for LinkedIn Ad Auctions

March 14, 2021

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LinkedIn uses an ad auction system to determine which ads are shown to which members. The ad auction also determines the pricing. This helps ensure that as in any true marketplace, cost meets demand to show an ad to a targeted LinkedIn member. Members, then, are also getting the most relevant experience possible while advertisers are getting the best value based on their needs and marketing objectives.

If you’re curious to learn how LinkedIn’s ad auctions work, watch the video below, which walks you through it, or check out our auction elements guide for optimization tips:

To help you learn some of the common terms involved with LinkedIn ad auctions, here’s a handy glossary with definitions.

LinkedIn Ad Auctions: A Glossary of Key Terms

  • Objective-based Pricing: This is the basis of LinkedIn’s ad pricing structure, aligning with the Objective-based Advertising experience in Campaign Manager. The objective you choose for a campaign determines the available optimization goals and bidding strategies, which then determine how your campaign is charged.
  • Bid: The bid is the amount that you are willing to pay for a LinkedIn member to take an action. Note that this is generally not the price you’ll ultimately pay, as LinkedIn uses a second-price auction format.
  • Second-price Auction: An auction system wherein the winner pays only the price offered by the second-highest bidder plus one cent. 
  • Relevancy Score: A calculated score for your ad based on how likely LinkedIn members in your target audience will engage with it. These calculations are determined by predictive measures such as Expected CTR. Relevancy Score isn’t shared but used in the backend.
  • Campaign Quality Score: This is a proxy for Relevancy Score that can be used directionally if deciding to edit or duplicate campaigns. You can find this score in the Campaign Manager Tool.
  • Expected Click-through Rate (CTR): A prediction of how many times your ad will be clicked based on historical performance data and your landing page experience. (Also sometimes referred to as Predicted Click-through Rate, or pCTR.)
  • Predicted Response Rates: A broader term used for the above formula, accounting for engagements and conversions of all types.
  • Bidding Strategy: There are three different options for bidding strategy that advertisers can select, each influencing the eventual ad price in different ways.
        1) Maximum Delivery: Uses automated bidding to ensure your campaign is competitive in the ad auction. Designed to maximize your campaign results while utilizing your full budget.
        2) Target Cost: Allows you to set a target cost per key result and leverages automated bidding to maximize your campaign results while ensuring your daily average cost per result stays close to your target cost.
        3) Manual Bidding: Gives you the most control over your bid in the ad auction by allowing you to specify the amount you’re willing to bid for a key result. The value that you enter is the exact bid that is used in the auction.

  • Cost-per-click (CPC): Pricing based on how many members click your ad.
  • Cost-per-impression or Cost-per-1,000-impressions (CPM): Pricing based on how many members see your ad.
  • Pay-per-send or Cost-per-send (CPS): Pricing based on how many Message Ads are successfully delivered.
  • Billable Events: Actions taken by users that advertisers are charged for, based on campaign objectives. For example, when you choose the Website Visit Objective, you’ll only be charged when someone clicks the link to your website.
  • Target Audience: The audience you select to serve your ads to based on shared attributes and LinkedIn profile data such as location, company, job title, education, and demographics. You can also create custom audiences using Matched Audiences.

With that, we’ve covered all the key terms you need to know for LinkedIn ad auctions. Now you can put this knowledge to good use by building a new ad campaign and optimizing for your marketing objectives using these key insights. 

For the latest in bidding strategies to maximize the results of your campaign, check out these bidding strategy guides. Then click on over to Campaign Manager and get started!