How exactly does Facebook determine the Cost per Impression for ads?
For example, let’s say after running a campaign for long, we found that for every 100 rupees spent FB ran 2000 impressions. So the cost per impression was 100/2000=0.05… Now the question is what are the factors that led FB to charge 5p per impression? Why not 4p or 3p? At 3p/impression we would have achieved 100/0.03=3333 impressions in 100 rupees thus increasing the possibility of achieving clicks and conversions.
Now, the exact answer will indeed be a business secret for Facebook!
And it involves understanding a lot about how internal mechanics of ad-making happens.
A simple model is that Facebook considers these factors:
1. Who else is trying to reach out to the same target audience at the same time. Hence, a bidding takes place (with an upper limit since an advertiser will not like to bid too high).
2. How much people who are seeing are liking (or interacting) with your ad. Facebook wants to maintain a fine balance between pushing paid promotion and quality content to its users. Hence, if a lot of users start clicking on your ad, Facebook determines it is a relevant ad and thus starts showing it to more people even if you have bid less. Hence, cost per impression starts going down.
So only a more detailed in depth research will be able to give you a trend on how Facebook changes the cost per impression for its Ads.