Facebook Ad Auction vs. Other Auctions
Today, advertisers can use their bid to tell us just how much they value a specific outcome. The auction then uses their bid to optimize the ad for that specific outcome. The bid is usually the maximum amount they end up paying for that outcome (it can sometimes be less!)
This is the way the Facebook ad auction works because we've structured it based on the Vickrey-Clarke-Groves (VCG) model. It is an incentive-compatible auction, meaning that if advertisers bid their true value for the action that the ad is being optimized for, this can help maximize their ROI.