This is a great basic introduction to Google PPC advertisers.
We come to think that highest bidder will always rank higher than lower bidder due to the nature of traditional auction. However, it doesn’t work that way with Google Adwards. Here are the main takeaways of these three key points that determine ad positions and CPC (cost per click) for Adwards.
What determines the Quality Score
1) Quality score is determined by Relevancy, Landing Page, and Click-through Rate (CTR).
2) Relevancy is determined by language used within the ad, and its language against the keywords used in the search query.
3) Landing page should have relevant, original content, quick load time, minimal pop-ups/unders, and transparency of site interaction between the server and users.
What determines Ad Ranking
1) Ad ranking is determined by Bid Price (BP) and Quality Score (QS):
Ad Rank = BP x QS
2) Ad with highest Ad Rank gets the top position.
What advertisers pay
1) Paid price is the bid amount the price is set by the advertiser below him/her.
2) Advertisers do not necessarily pay the max bid price.
3) High quality score will yield lower price or CPC.
4) Advertisers have to pay:
P1 = Price that Advertiser-1 pay
Q1 = Quality of Advertiser-1 ad
B2 = Bids of Advertiser-2
Q2 = Quality of Advertiser-2 ad
Note: Ad Rank = (B2)(Q2) = Bid Price x Quality Score
(P1)(Q1) = (B2)(Q2)
P1 = [(B2)(Q2)] / (Q1) = CPC
Here is the video. Check it out!