Marketing onGoogle<br />How Google Ranks Advertisers<br />davidgracia.com<br />
Ecosystem of Three Players<br /><ul><li>Advertisers want to show their adds to the right users</li></ul>Google<br /><ul><l...
Maximum Bid<br /><ul><li>Lets suppose there are 4 advertisers and only 3 add placements for a given “keyword” or “search p...
Two Criteria for Add Ranking<br /><ul><li>If the advertisers’ willingness to pay were the only factor considered, there co...
The Quality Score<br /><ul><li>CTR: each click is interpreted as a vote for a webpage or advertiser</li></ul>Landing Page<...
Price and Quality<br /><ul><li>Thus, each advertiser has a willingness to pay (maximum bid) and a quality score</li></ul>M...
Ad Rank<br />Max Bid<br />Quality Score<br />Ad Rank<br />=<br />Position<br />X<br />Advertiser 1<br />$ 4.00<br />1<br /...
Determining Cost Per Click<br /><ul><li>Even though advertisers set a maximum bid for a given keyword …</li></ul>P1<br />Q...
The Value of Quality<br />Max Bid<br />Quality Score<br />Ad Rank<br />=<br />Actual Cost<br />X<br />Advertiser 3<br />$ ...
Summing Up<br /><ul><li>Users receive relevant adds and information</li></ul>Google<br /><ul><li>Advertisers show their ad...
Marketing on Google
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Marketing on Google

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How Google Ranks Advertisers

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Marketing on Google

  1. 1. Marketing onGoogle<br />How Google Ranks Advertisers<br />davidgracia.com<br />
  2. 2. Ecosystem of Three Players<br /><ul><li>Advertisers want to show their adds to the right users</li></ul>Google<br /><ul><li>Users want to get information relevant to their search queries</li></ul>Advertiser<br />User<br /><ul><li>Google wants users to find what they search so that they click and keep coming</li></ul>Contextually relevant advertising<br />
  3. 3. Maximum Bid<br /><ul><li>Lets suppose there are 4 advertisers and only 3 add placements for a given “keyword” or “search phrase”</li></ul>Max Bid<br />Advertiser 1<br />$ 4.00<br /><ul><li>Every time a user types a search term an auction among the possible advertisers is run</li></ul>Advertiser 2<br />$ 3.00<br />Advertiser 3<br />$ 2.00<br /><ul><li>Every advertiser is willing to pay a different price or cost per click for a given keyword: this is the maximum bid</li></ul>Advertiser 4<br />$ 1.00<br />Is price the only criterion for add ranking?<br />
  4. 4. Two Criteria for Add Ranking<br /><ul><li>If the advertisers’ willingness to pay were the only factor considered, there could be non relevant adds in the top positions</li></ul>Price:<br />CPC<br /><ul><li>If users perceive the adds do not match with their search queries they won’t click and won’t keep using Google</li></ul>Quality Score<br /><ul><li>Google ranks advertisers according to 2 factors: price and quality</li></ul>What determines the quality of the advertiser?<br />
  5. 5. The Quality Score<br /><ul><li>CTR: each click is interpreted as a vote for a webpage or advertiser</li></ul>Landing Page<br /><ul><li>Relevancy: match between the content of an advertiser’s webpage and the user search query</li></ul>Relevancy<br /><ul><li>Landing Page Quality: relevant and original content, easy to navegate, quick load times, etc.</li></ul>How does the Quality Score influence the add ranking?<br />
  6. 6. Price and Quality<br /><ul><li>Thus, each advertiser has a willingness to pay (maximum bid) and a quality score</li></ul>Max Bid<br />Quality Score<br />Advertiser 1<br />$ 4.00<br />1<br /><ul><li>The Add Ranking depends on a combination of both factors</li></ul>Advertiser 2<br />$ 3.00<br />3<br />Advertiser 3<br />$ 2.00<br />6<br /><ul><li>To keep it simple let’s suppose the add ranking is just the multiplication of both factors</li></ul>Advertiser 4<br />$ 1.00<br />8<br />How does the Quality Score influence the add ranking?<br />
  7. 7. Ad Rank<br />Max Bid<br />Quality Score<br />Ad Rank<br />=<br />Position<br />X<br />Advertiser 1<br />$ 4.00<br />1<br />4<br />X<br />Advertiser 2<br />$ 3.00<br />3<br />9<br />2<br />Advertiser 3<br />$ 2.00<br />6<br />12<br />1<br />Advertiser 4<br />$ 1.00<br />8<br />8<br />3<br />What is the actual CPC the advertiser needs to pay?<br />
  8. 8. Determining Cost Per Click<br /><ul><li>Even though advertisers set a maximum bid for a given keyword …</li></ul>P1<br />Q1<br />X<br />P2<br />Q2<br />X<br />=<br /><ul><li>… it does not necessary mean they will end up paying that much</li></ul>P1<br />P2<br />Q2<br />X<br />=<br />Q1<br />/<br /><ul><li>Each advertiser pays just the minimum price necessary to beat their competitors</li></li></ul><li>Actual Cost Per Click<br />Max Bid<br />Quality Score<br />Ad Rank<br />=<br />Actual Cost<br />X<br />Advertiser 3<br />$ 2.00<br />6<br />12<br />(9/6) = $ 1.5<br />1<br />2<br />Advertiser 2<br />$ 3.00<br />3<br />9<br />(8/3) = $ 2.7<br />Advertiser 4<br />$ 1.00<br />8<br />8<br />(4/8) = $ 0.5<br />3<br />Advertiser 1<br />$ 4.00<br />1<br />4<br />X<br />Why is quality so important?<br />
  9. 9. The Value of Quality<br />Max Bid<br />Quality Score<br />Ad Rank<br />=<br />Actual Cost<br />X<br />Advertiser 3<br />$ 2.00<br />6<br />12<br />(9/6) = $ 1.5<br />1<br />Advertiser 3<br />$ 2.00<br />8<br />16<br />(9/8) = $ 1.1<br />1<br />2<br />Advertiser 2<br />$ 3.00<br />3<br />9<br />(8/3) = $ 2.7<br />Advertiser 4<br />$ 1.00<br />8<br />8<br />(4/8) = $ 0.5<br />3<br />Higher quality score implies lower cost per click<br />
  10. 10. Summing Up<br /><ul><li>Users receive relevant adds and information</li></ul>Google<br /><ul><li>Advertisers show their adds to relevant users and get better results</li></ul>Advertiser<br />User<br /><ul><li>Google meets the needs of both users and advertisers and they keep using the system</li></ul>Contextually relevant advertising<br />

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