When it comes to online shopping, many begin their journey through their favorite search engine — which, for most people, is Google. As of January 2022, Google averages over three billion searches per day.
Google ads are an efficient and cost-effective way to get your product ads in front of relevant audiences — with the help of targeted keywords and Google Ads Auctions. But what is a Google Ads Auction, and how does it work?
Keep reading to learn more about Google Ads Auctions, and subscribe to Revenue Weekly for more marketing tips from WebFX!
What is a Google Ads Auction?
A Google Ads Auction is a bidding competition among sellers for the top ad placements on Google search engine results pages (SERPs). The winner receives the first position, which sits above organic results. Each time someone conducts a Google search, an ad auction begins.
Is Google Ads a second-price auction?
Yes. In a typical auction, the winning bidder would pay the total amount they bid. However, Google uses a second-price auction method.
A second-price auction ensures the winner pays the price of the next highest bidder. The winner only pays the amount necessary to beat their competition.
How does Google ad bidding work?
For a seller to place a bid, a comparison shopping service (CSS) must represent their ad. CSS providers come in all varieties and have several pricing models, but the bones are the same.
You choose your bidding keywords and the maximum amount you are willing to pay per click, otherwise known as your maximum cost-per-click (CPC) bid.
How does Google calculate your ad rank score?
Once you’ve set up a Google Ads pay-per-click marketing campaign, Google does the rest. To provide the most useful, relevant information for searchers, Google calculates your ad rank using three main factors:
- The bid: Your maximum CPC bid or the highest amount you are willing to pay for a click on your ad.
- The quality of your ad: Your ad’s Quality Score includes three components — your expected click-through rate (CTR), the ad’s relevance, and your website’s landing page experience.
- The expected impact of ad extensions: Ad extensions are additional information the searcher might find helpful. Ad extensions include company phone numbers and site links. The more valuable information you include in your ad, the more a shopper has a reason to click on it.
An example of an ad auction in action
The ad rank score determines your placement on SERPs. Does that mean you should raise your bid price to outdo your competitors, even if your ad doesn’t score as well on quality or expected ad format impact?
Fortunately for your bottom line, the answer is no! Let’s say three bidders are competing for the same long-tail keyword — “affordable red high heels.”
Bidder One bids $4 with a high ad Quality Score and expected format impact. Bidder Two bids $3 with a high Quality Score and medium expected format impact. Bidder Three bids $5 with a low Quality Score and a low expected format impact.
Who will place first on SERPs? If you guessed Bidder One, you’re right!
Bidder One places first because she has the highest Quality Score and expected format impact among her competitors. Because of Google’s second-price auction method, she’ll only pay Bidder Two’s maximum CPC bid amount of $3 per click.
How do you improve your ad rank?
Though Google doesn’t freely share the complete ad rank formula, they do give us the information they consider when calculating your ad’s Quality Score:
- Expected click-through rate (CTR): Your expected CTR can show how well your ad will perform based on its historical keyword performance data. Google predicts your ad’s performance based on other similar ads in your industry.
- Ad relevancy: Google looks at your ad content to make sure it matches your target keywords. This quality control prevents advertisers from taking up space on SERPs with unrelated ads. For example, if someone searches for red high heels, they don’t want to see red sneakers on their SERPs.
- Landing page experience: Your ad is only as impactful as your landing page experience. For example, if a qualified lead is interested in your ad but has a poor experience trying to load your website, they’ll leave. According to Google, a great landing page should be relevant, original, easy to navigate, and transparent.
How to improve your Quality Score
Now that you know what contributes to your Quality Score, it’s time to put that knowledge into action. Here are some metrics to use as starting points for improving your Quality Score:
- Expected CTR: Is your ad copy specific, and does it define a unique selling proposition (USP)? Did you include a high-quality image of the product? Is there a call to action or contact button?
- Ad relevancy: Does your ad copy and imagery closely match your keyword? Could you split the ad groups to use more specific, targeted keywords? Can you group keywords into the same ad?
- Landing page experience: Does your ad link to the relevant product or category page? Do you offer what you said you would? Is your page load time quick? Is it mobile-friendly?
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