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, ad relevance 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 a high 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.
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 your Quality 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!