How Does Google Ads Auction Works?

3 months ago

How Does Google Ads Auction Works?

In this article, I’m going to explain the basics of the Google ad auction system. Because it’s not a traditional auction, as you and I most likely understand, it’s an auction with a difference.

Understanding this distinction is crucial because it can help you improve your Google ads, potentially yielding better results.

As mentioned, the Google ad auction system differs from a traditional auction. In a traditional auction, multiple people bid on something, and the person willing to pay the most wins the auction

Google Ads operates a bit differently. The person who wins the auction and secures the number one ad spot isn’t necessarily paying more for a click than the advertisers below them in other ad spots. This difference arises because the top-ranking ad may have a higher quality score.

In the Google ad auction, the winner is determined by having the best ad rank, which is a function of both your bid and your quality score. This emphasizes the significance of a good quality score in achieving success with Google Ads. Having a high-quality score means you can potentially reduce your cost per click while still maintaining a prominent ad position.

To illustrate this, I conducted a quick Google search for ‘dentists, Sydney.’ As mentioned, the individual in the number one ad spot might not be paying more than the advertisers below them

So it’s really good to have a good quality score. The other unique thing about the Google ad platform is that you only pay when somebody clicks on your ad, as I can show you right here in my account.

You’ll see here that I’ve got one particular ad group there which had 17 impressions, no clicks, and therefore no cost, so you only pay when people click on your ad, and are therefore interested in your product or service.

This is a little bit different to Facebook, where most people just pay for an impression. That is not the case on the Google ad platform, you can actually find what your CPM is inside Google ads.

To locate this information, navigate to the campaign level. From there, click on ‘Columns’ and then select ‘Modify Columns

and under performance and you scroll down here, you’ll see average CPM. And then that will tell you what the CPM is.

So as you can see here for this particular campaign, 232 CPM, which is expensive.

It’s worth noting that the quality score is assigned to individual keywords. Consequently, some keywords may have a good quality score, resulting in a higher ad rank. On the flip side, other keywords might have a lower quality score, leading to a less favorable ad rank and the possibility of not being displayed.

To gain insights into who else is advertising and competing against you, you can refer to your Auction Insights report.