How Does Google Ads Auctions Work?
Posted by Patrick LeMay | Posted in MMO | Posted on 12-12-2011 | 6
Internet has grown at a prolific pace over the last decade or so. This has also resulted in growth of the online marketing industry. Advertising on the internet is a very major part of internet marketing, and since Google is one of the most powerful companies online, it developed a tool called Adwords which helps people in online advertising. In fact, Adwords has become one of the most widely used online advertising programs. Despite the huge success achieved by this program a lot of companies are not fully aware about how the process works. Lack of knowledge leads to companies spending money without knowing whether the program will succeed or not.
The auctions conducted by Google for the advertisements are basically aimed at providing customer satisfaction by giving more relevant ads. But Google also makes sure that all the advertisers also get a position in the ads. Last but not the least, Google also ends up making a pretty healthy profit. In fact, more than 97% of Google’s revenue comes through advertising. Considering the fact that Google makes over $30 billion annually, that is a lot of money. Here are the steps involved in the entire auction process.
How does Google Ads auctions work?
Firstly, you need to have an account with Adwords. Once you have made an account you need to fill in various details. The most essential one is identifying the keywords that you want to use for your product. After you have decided the keywords, you create groups of these keywords that can be paired with different ads. This is the only thing that you have to do. After this whenever someone enters a query in Google search bar, Google checks the Adwords list and sees whether there is a need of an auction for that particular query. If there are more than two accounts bidding or the same set of keywords then the auction takes place.
You should know that the search query is not the exact keyword. Even a query like medicine for dogs may be associated with a pool that has keywords as pet medicine. After this, Google will take the keywords from the accounts and enter them in the bidding process along with the maximum bid specified by that account for the particular ad.
Determining the Rank and the Cost Per Click
The next step in the process is to determine which ad will be shown at what rank. For this Google uses two factors, the maximum amount that you have specified for the bid and the quality factor. The quality factor is determined using various components like the Click Through Rate (CTR) and relevance of the landing page amongst other things. The ads are ranked on the basis of the product of these two numbers. The advertiser with the highest result is placed at the top.
To determine the price paid by you, the ad rank score of the advertiser below you is divided by your quality factor. You add $0.01 to this figure and that is the amount you have to give as Cost per Click (CPC).



