i>How does Google
calculate the actual cost An understanding of the way that
you pay per click on Google Google Adwords ranks PPC bidders
Adwords? An explanation of what a to determine who has won each of
Google Quality Score is, and why the real-time auctions is
having a big one can reduce the essential to establishing a
amount you pay per click with coherent and profitable strategy
Google Adwords. when taking part in the Google
Adwords PPC Programme.
Google Adwords is an auction
based Pay Per Click (PPC) The Google Adwords Quality
advertising system where you as a Score
PPC advertiser set the maximum
amount you are willing to pay for The Google Adwords system for
each click you receive from your determining who wins the PPC
advertisement placed with Google. auction is based upon the belief
that high quality advert
As an Adwords advertiser you creatives benefit all parties
compete in a real-time auction involved. When the ads that
every time a keyword prompts your Google displays match the needs
ad. Adwords is a 'Vickery' type of searchers the assertion is
auction. In a Vickery auction that this benefits advertisers,
once a winner has been decided, searchers, publishers and Google
the actual price paid is not the alike. They call this
maximum amount bid, it is one 'relevancy'.
penny more than the bid of the
second highest bidder. Google Given that the winning bidder
Adwords adds a twist to this, as gets the highest position and the
winning bidders are determined by highest position gets the most
Ad Rank not by maximum bid. clicks, the goal for you as a
Google advertiser is to get the must be aware of what they have
highest position for your ad at to do to achieve a high Google
the lowest possible cost per quality score.
click (CPC).
Exactly how Google calculates the
Every time a search is triggered Quality Score is unknown to us
and an auction has taken place, and is a closely guarded trade
Google ranks the resultant ads by secret.
'Ad Rank'. The position of each
ad is based upon its 'Ad Rank' Google do tell us however that
Quality Score is determined by a
Ad Rank = 'Maximum Cost Per keyword's clickthrough rate
Click' x 'Quality Score' (CTR), the historical performance
of that keyword, the relevance of
Since the 'Ad Rank' is not just text in the ad, and other
the maximum amount that an relevancy factors including the
advertiser has bid the highest landing page of the target url.
bidder does not always win. The
winning bid is based upon an The Google Quality Score &
additional set of elements, which Cost Per Click (CPC)
together make up the Google
Quality Score. Naturally the higher an ad's
Quality Score, the more relevant
The Quality Score is the basis it is for the keywords to which
upon which Google measures the it is tied. When ads are highly
relevancy of your ad to users and relevant to the searcher they
has a major effect in deciding tend to earn more clicks and
how much you actually pay per therefore achieve a higher
click. This means that to compete clickthrough rate (CTR). This
efficiently an Adwords advertiser conveys to Google that users like
what they see and are finding the Making assumptions about the
ad relevant and clicking on it to Google Quality Score, here is an
find out more. A higher CTR will example of how the Google Adwords
increase a keyword's Quality system would decide who wins an
Score which in turn increases the auction and how much they would
Ad Rank. As a PPC advertiser this pay per click.
means that you can maintain or
increase your position whilst I've used 5 PPC bidders to
lowering the actual cost per display how it works but in
click that you pay. reality there will be many more
bidders involved in each PPC
Furthermore Google stops auction.
displaying ads for keywords that
have a low Quality Score. If an The row titled 'Actual CPC' below
ad has a low Quality Score on a shows how much each Adwords
certain keyword it means that bidder would pay for their click
users are not finding that ad following that particular
relevant to their needs and auction.
Google will disable the keyword
by making it inactive. Noddy
Quality Score = 3
A Practical Example Of How The Maximum CPC = "£0.55
Google Quality Score Works Ad Rank = 1.7
Actual CPC = "£0.34
The PPC bidding system inside
Google Adwords is a complicated Big Ears
one because we can never fully be Quality Score = 1
sure of the Quality Score of Maximum CPC = "£1.00
competitive bids. Ad Rank = 1.0
Actual CPC = "£0.81
/ 'Quality Score of Winning
PC Plod Bidder') + 1p
Quality Score = 1
Maximum CPC = "£0.80 Which in our case is:
Ad Rank = 0.8
Actual CPC = "£0.41 ('Big Ears Ad Rank' / 'Noddy's
Quality Score') + 1p
To calculate how much each PPC
bidder pays, Google first = "£0.34p
calculates the Ad Rank for each
bidder. The Ad Rank is Google's The same logic is applied to each
Quality Score multiplied by the bidder in the list, Big Ears and
Maximum CPC. In the statistics PC Plod.
above we've ranked the ads by
their Ad Rank and we can see that In the example above you can see
Noddy has won this PPC auction that because Google is rewarding
and his ad will be in top Noddy because his ad is relevant,
position in the search engine he is actually paying much less
results. per click than his competitors
Big Ears and PC Plod.
Noddy was prepared to pay Google
up to a maximum of "£0.55 per Using this formula, if all other
click but he only needs to pay 1p factors remained constant, Big
more than would be necessary to Ears would have to pay a whopping
keep his Ad Rank above the next "£1.66 per click if he wanted to
highest ranked bidder - "£0.34. move up to a postion above Noddy.
The calculation is:
As you can see from this example
'Actual CPC' = any PPC advertiser that does not
('Ad Rank of Next Highest Bidder' understand the concept of Quality
Score runs the risk of paying
heavily for their ignorance.
About the Author:
Sayu Ltd (http://www.sayu.co.uk) specialise in pay per click management services. By utilising advanced statistical techniques,long tail marketing and proprietary automated bidding software we can reduce overall PPC advertising spends and increase the quantity and quality of traffic visiting a website. See http://www.sayu.co.uk for more information
Read more articles by:
Tracey Simpson
Article Source: www.iSnare.com
