Honestly, I'm not sure how to say this politely, but your argument does not map to my understanding of how FB ads worked (I was there from 2013-18, predominantly working on ads).
Steps 1-3 are correct, step 4 is not.
What actually happened is that you'd say I want to spend $10 on FB ads. There's a system called pacing that reduces your bid most of the time so that you don't run out of budget before the end of the day.
Separate to this, FB estimated how likely a user was to click/convert on your ad, and multiplied your bid by this probability (times 1000). This number was used to rank your ad against other ads/content.
So, what would actually happen is that you'd see amazing performance on that $10 budget, and you'd be like FB rocks spend all the money. Unfortunately, because of the way the above worked, when you 10xed the budget it would all far apart.
If FB had actually wanted to maximise short term revenue they might have behaved like you said, but the reason they've made so much money over the years is that they were always much more focused on the longer-term revenue.
If you think about it as a diminishing returns curve, it becomes something that can be understood and explored. Of course, the sales people will try to get you to expand quickly and your most efficient spend will come first - after your inflection point, your incremental return will decrease.
However, fighting that pull is the optimization opportunities enabled only at scale. If I run 1 ad, I know how that performs. If I run 1000 ads, I know which ad performs best.
Steps 1-3 are correct, step 4 is not.
What actually happened is that you'd say I want to spend $10 on FB ads. There's a system called pacing that reduces your bid most of the time so that you don't run out of budget before the end of the day.
Separate to this, FB estimated how likely a user was to click/convert on your ad, and multiplied your bid by this probability (times 1000). This number was used to rank your ad against other ads/content.
So, what would actually happen is that you'd see amazing performance on that $10 budget, and you'd be like FB rocks spend all the money. Unfortunately, because of the way the above worked, when you 10xed the budget it would all far apart.
If FB had actually wanted to maximise short term revenue they might have behaved like you said, but the reason they've made so much money over the years is that they were always much more focused on the longer-term revenue.