In order to maximize our investment in SEM, we need to know how does the Google ads bidding process works and how it calculates both the order of the ads and the cost per click. Let’s see step by step how it’s done.
- The Search: A person enters the Google search engine and types what they are looking for, for example, “cupcake recipes”
- Ad filtering: The Google ads system filters ads that are related to the search “cupcake recipes”
- New ad filtering: From the previous result, Google ads still filters more ads to find those that are truly relevant, discarding those that do not meet all the characteristics (for example, they are intended for people with another language, country …)
- The ads are ordered: Google orders the ads using a formula called Ad Rank
- The ads are displayed: The visitor sees the ads.
- In each new search the process is repeated: Each time a person makes a search, this process is repeated from beginning to end.
It is a fairly simple and effective process that makes visitors always see announcements related to our search, relevant to us and in which we click (that’s why Google ads is so effective).
How it is decided which ads appear in the first positions and which are not, is called Ad Rank and it’s a combination of the CPC (cost per click) and the Quality Score that is a metric developed by Google ads to measure the quality of the advertisements.
What is Ad Rank?
Our Ad Rank determines the order in which our ads will appear, in order to put it into perspective, we will show you an example. Let’s say that we have 3 advertisers:
Advertiser I = 1.5 | 26 | 39
Advertiser II = 2 | 16 | 32
Advertiser III = 5 | 5 | 25
Advertiser I has the best Ad Rank (39 = 1.5 x 26) and will appear first, followed by Advertiser II and Advertiser III but does not determine the cost of the click. The Ad Rank of the advertiser that is below us is used to calculate the cost. Let’s continue with our example to see it clearer.
Suppose that the person who sees the ads finally decides to click on Advertiser II (which appears in second place). To calculate how much you pay through Google ads bidding process, Google uses the following formula:
The C.P.C. is equal to the Ad Rank of the ad below our ad divided by our Quality Score and the result we add 0.01.
C.P.C. of Advertiser II = (25/16) + 0.01 = 1.56 + 0.01 = $1.57
Advertiser II will pay Google $1.57. Recall that the C.P.C. Maximum of Advertiser II is $2, this means that even if the previous formula gives a result greater than $2 Advertiser II will only pay $2 max. We also see that Advertiser III, who is even willing to pay much more money than the rest of the advertisers, does not appear first since it has a very low-Quality Score.
In other words…
The Google ads bidding process is very simple and seeks above all to offer those searching in Google relevant and effective ads. Keep in mind that more than having a lot of money to spend on Google ads is important to have relevant ads that are of interest to visitors. If we optimize our Quality Score we will save a lot of money in our Google ads campaigns.
In Synapse Ads blog we guide you on how to use these types of tools. We also offer you the keyword mixer tool that will guarantee the success of your conversion optimization. Your commercial growth is our priority and we have all the information to help your business improve every day.