PPC Basics: How Does The Ad Auction Work?

By December 10, 2014 January 9th, 2015 Pay Per Click

One of the most common questions a PPC professional hears is, “How does Google decide when and where to show my ad?” Here is a quick overview of how the ad auction works, what triggers your PPC ad to appear and where:

How Does The Auction Work?

Every day, there are searchers looking for your exact products or services online and they do so using one of many search engines available such as Google and Bing. Advertisers are able to upload ads to appear in the list of search results which are triggered by participating in a keyword auction.

To start, advertisers decide which keywords and phrases are important to them to drive traffic to their website. The search engines hold auctions every time these keywords are searched, allowing advertisers to bid on the individual keywords and then returning the most relevant ads (results) to the searcher. The search engines use algorithms to decide which results are the most relevant, factoring in the following:

1. Quality Score

2. Your Bid

3. Expected Impact From Ad Extensions and Other Ad Formats

What Determines My Quality Score?

The search engine assigns you a quality score to each keyword you bid on, which essentially estimates how relevant your ad and landing page are to that individual keyword. The higher the quality score, the less you have to pay for a better ad rank. Keep in mind though, quality score is just one of the components that determines your ad rank.

What Do I Pay?

You are charged each time someone clicks on your ad. You are not charged if someone just sees your ad but does not click on it (impressions).

Basically, you are charged 1 penny more then the next lowest competitor in order to hold your ad rank. You will never pay more then your bid (the maximum you are willing to pay per click) and as noted above, your ad rank is determined based on a number of factors which consider your bid, how relevant your ad and landing page are to the searcher’s query and expected impact from ad extensions and other ad formats.

Why Is My Competitor Above Me?

Relevancy is just one of the factors that determines your ad rank. Lets say a less-relevant competitor bids on the same keyword as you and appears above your ad. This may be due to the competitors bid, if they are willing to pay significantly more per click then other advertisers in the same auction. For this reason, it is best to have a high quality score and competitive bid to secure your desired ad rank.

For more helpful information on the Ad Auction, view this video from Google.

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