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Andrew Campbell, OpenStore's Quant
The Andrew Faris Podcast
Is Facebook Really Good at Estimating the Click-Through Rate?
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When Facebook constructs a bid, right, it's constructing a bid for you that feeds into what's called a second price auction. It's both estimating the likelihood of that person to tap on your ad and then actually check out. So it effectively comes up with an expected value for each customer that you serve an impression to. The optimal strategy is to cap that marginal pack that you'll pay for any incremental customer.
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