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Understanding the AdWords Auction

By on Nov 4, 2014 in AdWords | 0 comments

Adwords auction explainedDid you know that every time a search runs on Google.com an instant auction takes place to decide whose advertisements show and where they show on the page? This is one of the fundamental parts of the AdWords system. It only takes milliseconds to happen and it helps display the most relevant information to searchers every time they run a new search query. This gives advertisers ability to adjust their ads, keywords and campaign settings and begin to see immediate results. It also allows Google users the opportunity to find the information that is most important to them at the time of the search.

This is critical to always display great content depending on where you are when you search, what time of the year it is (seasonal searches) and most importantly what you are searching for. The ad auction takes into consideration many different criterion that together allow Google to decide what a person is looking for and produce timely and relevant information to display to them.

How Does Google’s Ad Auction Choose Which Ads To Display?

To completely understand the ad auction, you must understand the factors used to choose which ad is relevant and thus, which will be displayed and in what order on the results page. The main factors Google uses to choose which ads show higher on search engine results pages do include the maximum cost per click chosen by the advertiser, but it does not stop there. The other factors are described in detail below.

The overall ad rank is decided by all of these three factors; bid, quality and format impact. In many cases an ad that ranks well for these factors can beat a higher dollar amount bid and actually display more prominently on page. Remember, the auction is running each time a search query is run. If you have a low ad rank, it can be fixed to bring your ads to more visible positions if you make the necessary changes.

Google’s Chief Economist Explains AdWords Auction

Here is a video straight from Google and Hal Varian (Google’s Cheif Economist) that further explains the ins and outs of the ad auction. There are many small factors but understanding the main parts of this equation will help you start seeing better results and possibly even lower bids on your campaigns.

Quality Score

This is one of the three main factors that will be used to derive the overall ad rank. There are a few different pieces to this puzzle. The expected click through rate, landing page experience and ad relevance all come into play here. Quality score is rated on specific keywords used in your campaign.  The overall keyword quality score is an accumulation of the factors described in detail below. When combined, this score is only one factor taken into consideration to decipher your ad rank.

Expected Click Through Rate – This is one way that Google in essence crowd-sources information to decide ad relevancy. It is assumed that ads that get more clicks are more relevant. This is true in most cases and searchers cast votes with clicks even if they don’t know it.

Landing Page Experience – This makes a huge difference in the overall user experience and can help boost ad rank by making sure you follow the rules. Google wants to see unique relevant content, simple navigation and transparency about how you or your company will be using any personal information collected. If you have any offers in your advertisement, it is good to have them available on the landing page or one click from it. Free offers, discount codes and other special offers are great to boost click through rates, but you must deliver on your promises.

Ad Relevance – This seems straight forward, but many people overlook this altogether. Using related phrases to your keyword selection and other relative information and offers in your advertisement helps your overall ad rank. Relevant ads, brings the content that users are looking for to them.

Format Impact

Google offers a variety of ad formats to advertisers. Even within text ads, there are many different ways to display information that your customers may find helpful. The overall impact of these formats helps determine you overall ad rank. Site links, phone numbers, user ratings and other ad extensions offer more information to the user and therefore Google values these styles of ads higher than those that do not offer such extensions. All ads have the opportunity to utilize ad extensions, so take the time to setup site links or find out what other formats you can use to extend you advertisements.

Bid

The bid is a dollar amount dedicated to each ad group or specific keyword in your Google AdWords Campaign. This is just one more factor that comes into play to decide your overall ad rank. The bid can boost your ad rank and help you achieve higher placement. However, this is just one factor that help your overall ad placement on search engine results pages.

Maximum CPC – The maximum CPC or cost per click, is just that. If you place a $3.00 bid, you will not be charged $3.00 every time your ad is clicked. Instead, you will only be charged the exact amount required to beat your next closest competitors ad rank. Let’s assume your ad rank is 9 and the advertiser above your ad has an ad rank of 11. In this case you may have to pay $2.76 to bring your overall ad rank to 12 and to be displayed above their advertisement.

Conclusion

The Google Ad Auction utilizes a variety of factors to consistently display relevant ads to search users. You can change your ad copy, landing page content and bids to boost your ad rank. Your ads can show above other advertisers offering a higher bid if your overall ad rank is higher. Ad auctions run each time a search query is requested from Google. Understanding these fundamentals of the AdWords system will help you achieve better results, more traffic  and hopefully a higher return on investment.

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