How Google Ranks Ads

In this section we’ll cover...

• How the AdWords auction works

• How Google calculates your place in the auction

• What’s Max CPC?

• How Quality Score is calculated

• How all this affects what you pay for a click

How does AdWords work?

Quality Factors:Clickthrough rate, keyword relevance, adrelevance and historical performance

Everyone wants to be in position #1

The position of each ad is determined using a ranking formula.

The magic ad ranking formula

Ad Rank =Maximum

Cost-Per-Click Bid(Max. CPC)

The Bottom Line:

x Quality Score

If you have a great Quality Score, you can still show in ahigh position with a low bid

What is your Max CPC?

• The maximum price you are prepared to pay for a click

• Your ‘bid’ in the AdWords auction

What is Quality Score?

• A measure of how relevant and useful your ads are.

• Do your ads & keywords provide a good user experience?

POOR

OK

GREAT

Note: The above example is for demonstration purposes only. It is not meant to indicate the actual quality score of the ads.

Quality Score measures user experience

How Google calculates Quality Score

Clickthrough-Rate (CTR)

Of the people who saw your ad, how many clicked on it?

+Relevancy

Do your keywords match your ads?Does the search query match your keyword?

+Landing Page Quality

Does your landing page provide a good user experience?

You can see your Quality Score for each keyword

The magic ranking formula - example

Alison, Scott and Jon are all bidding on the keyword ‘zipline kits.’

Based on their Max CPC and Quality Score, whose ad will show in first position?

Alison

Scott

Jon

Ad Rank

8 =

10 =

7 =

Max CPC Quality Score

$1.00 x 8 2nd

$1.00 x 10 1st

$2.35 x 3 3rd

How much do I actually pay?

Your actual CPC is the Ad Rank of the advertiser below, divided by yourQuality Score.

Ad Rank Max CPC Quality Score Actual CPC

Scott 10 = $1.00 x 10 = (8/10) $.80

Alison 8 = $1.00 x 8 = (7/8) $.88

Jon 7 = $2.35 x 3 = minimum $min

So you’ll show in a higher position if...

• Your Quality Score is at least 7/10 for each keyword

• Your bids are competitive

• Both!