With its 1.8 billion monthly users, Facebook has the unique ability to reach customers in a native environment without interruption. In order to maximize campaign performance, it is important to have a fundamental understanding of the auction environment. The DAT system has been designed to combine the needs of both advertisers and customers. This approach improves user engagement while providing much-needed cost controls. How does the Facebook Auction Work? Facebook used an economic theory called VCG (Vickrey-Clarke-Groves), to create a second-price auction environment. Essentially, the winning bid does not pay exactly what was bid, but rather a bid slightly higher than the second highest bidder. The primary benefit of this model is that it mitigates the risk of sharp jumps in spend. Ultimately, it is a win for advertisers as it creates a stable auction environment. Get the full story at Koddi