Google Ads or its former name, Adwords, is Google’s advertising system by which we help businesses achieve their goals. Today, we decided to share with you a very important statistic, and it is not clear from which, Google determines who will appear in the paid search results in first place, second place and so on.
We’ll also show you an example of how it works so that each of you can understand better. As always, we are here on your side and therefore if you need assistance, as a professional marketing and advertising company, we can provide you with the best solution for you.
It is important to note that Netolink has certifications on behalf of Google (and other entities), so our experts have spent hundreds of hours of internship and we help dozens of business owners achieve their goals.
What is an auction on the Google Ads system?
In general, an auction is a method of sale in which the person who offered the highest price, won the product. There are rules and guidelines and even a minimum price (threshold) that can not be offered a price below it.
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But in Google’s advertising system, that’s not exactly the case.
Ads on Google do not just appear randomly, and certainly not in the way the one who offers the highest price appears first. However, we would like to be precise and say that price is a very important factor, but it is not the only one like a regular auction.
The Google Ads auction is a process in which ads are shown and in which order they appear. The sale includes many variables, which makes this system more fair to businesses that can not invest tens of thousands of dollars a month.
However, like a regular auction, Google also has an auction that is based not only on the price the advertiser offers but on the ad rank that includes its Quality Score and the advertiser’s bid.
This means:
In order to be presented in the first result, it is not necessary to raise the bid and invest a fortune. Investment in ad quality may cause the advertiser to be in first place even if no maximum budget is spent.
How does a Google Ads auction work?
- A user is looking for some service.
- The system reduces ads to match specific parameters such as geographic location, technology, and another targeting, and filters disapproved ads.
- The system determines an Ad Rank threshold and determines which ads are ranked high enough to appear.
- The system determines the order of the ads based on Ad Rank – which includes the advertiser’s bid and the Quality Score (which is also complex and detailed below).
- The user sees all relevant ads.
What is Ad Rank threshold?
In order for an advertiser’s ad to appear to a user, it should meet the Ad Rank threshold that is a minimum bid. Ranking thresholds are determined by ad quality and other parameters such as ad position, topic, search character, certain signals, and user attributes such as location and device type. Google offers ad thresholds that will show ads at the top (above organic results) and at the bottom (below these results).
In fact, Ad Rank thresholds determine the threshold under which ads are not shown. This is why users may not see all ads or only one advertiser ad even if there are more competitors.
And what is Ad Rank?
An advertiser’s Ad Rank affects the order in which ads are displayed when they search on Google. The higher your Ad Rank, the higher your ad will appear. Ad Rank is determined by the following parameters:
- Bid – Cost / CPC bid offered by the advertiser.
- Real-time Ad Quality Score – This is a general assessment of ad quality. Each keyword gets a rating from 1 to 10, where 10 is the highest score. The score is determined by the quality of its historical performance. Quality Score consists of three factors:
- Expected clickthrough rate – How likely users are to click on ads triggered by the keyword.
- Ad relevance – how closely related the keyword is to the ad.
- Landing page experience – how clear and relevant the landing page is to the keyword and ad, easy to navigate and load quickly.
- Ad Rank threshold – A minimum bid for an ad to appear.
- The context in which the user searches – location and device of the user, the quality of the search terms, ads and search results on the page and the user’s properties.
- Ad extensions, and other ad formats – like call extensions, sitelinks, and other ad types.
However, it’s important to note that Google does not use Quality Score to determine Ad Rank at auction, but its components (expected clickthrough rate, landing page quality, and ad relevance). Because Quality Score is based on historical data and Ad Rank based on real-time data.
Example – Who wins the Google auction?
Let’s say a user searches Google for “designer clothes,” 5 advertisers participated in the auction as follows:
| Ad Placement | Advertiser | Quality Score | Maximum CPC | Ad Rank | Actual CPC |
|---|---|---|---|---|---|
| 1 | Your Business | 10 | $ 3 | 30 | $ 2.51 |
| 2 | Competitor A | 5 | $ 5 | 25 | $ 3.61 |
| 3 | Competitor B | 3 | $ 6 | 18 | $ 4.01 |
| 4 | Competitor C | 6 | $ 2 | 12 | $ 1.68 |
| 5 | Competitor D | 1 | $ 10 | 10 | $ 10.00 |
As you can see in the example above your business is placed in the first place with a quality score of 10 out of 10 and your maximum price is one of the lowest and is far from the highest. In addition, the actual price you pay is also lower than the maximum CPC. The price you pay is the minimum price you have to pass the competitor below you.
The actual cost is calculated according to the competitor’s Ad Rank, which is below the Quality Score, plus the minimum to pass it, which is $0.01 (At exchange rate in each country). Your business will pay $2.51 for the reason that the Ad Rank of those below (Competitor A – 25) divided by your Quality Score (10) – $2.50 + $0.01 = $2.51.
Let’s say Google has determined that an Ad Rank threshold is 20, who will appear?
In this case, only 2 ads will appear in your search results – your business and a competitor A, since only both are above the rating threshold.
Conclusion
As we have seen above:
- It is not mandatory to offer the highest price to win the auction.
- Ad Rank is based on a number of components, including bid, ad quality, and other parameters.
- Usually you will not pay the maximum price you offered – but less.
- Netolink has the certifications, knowledge, and experience in managing campaigns of customers and knows how to optimize the ads while improving the performance of many businesses.