Introduction to the Google Ad Auction
by PPC Bully on March 12, 2009 – Share This
Google Chief Economist, Hal Varian, explains the AdWords Ad Auction and how your max CPC bid and quality score determine how much you pay for a click on Google.com.
For your success!
Yefi, PPC Bully Team
yefi@ppcbully.com
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Great info. You guys always give out the best info.
Thanks
Charles
Excellent material! What is amazing is that it seems there are not so many Google secrets in case someone takes time to go to Adwords support section. The logic of Google algorithm can be understood and followed, at least it is clear what they are aiming to ideally.
This was very useful, and reinforces the tactic of bidding high to begin with, essentially losing money at first to boost your Quality Score.
Presuming that you are very confident your ad/keyword/landing page are top performers.
What a great find!
thanks for sharing with the community!
very useful to know
First really clear explanation I’ve seen of how the prices are determined for AdWords. Thanks so much for sharing.
Beautiful information. Somehow all of this making more sense. Thank you.
Why the advertiser who has a quality score of 6 ends up paying less compared to the person who even has a quality score of 10… when they are bidding at the same price of $4.00
great video, thanks for sharing!
Great info. All about the Quality Score
This is great! But, assuming, the advertiser’s Quality Score Increases during goggle’s review period, then, your “Actual Cost Per Click” WILL ONLY DECREASE, if the advertiser’s “Ad Rank” just below you, REMAINS THE SAME VALUE & COMPETITION’S CTR DOES MOVE UP THEIR Q.S.
Let us look at these examples:
ex: P1xQ1=b2xQ2 therefore, P1=b2xQ2/Q1 (and using values from Google’s video)
Advertiser #1: Ad Rank= Max Bid x Q.S.= $4.00 x 8=32
Advertiser #2: Ad Rank= $4.00 X 6=24
Now, using the data for Advert. #1 & calculating (P1) Actual Cost Per Click,
P1= 24/8(QS1)=$3.00
And, now Advert. #1 increases their Q.S. to a value of (10) and ONLY assuming (QS) for advertiser #2 remains the same value.
ex: Advertiser #1 P1=24/10(QS1)=$2.40 decreases
But, Advertiser #2 increases CTR & then,their Q. S. increases to a value of 8. Let’s see
what happens now!
Advertiser #2 Ad Rank= $4.00 X 8(QS)=32
Advertiser #1 P1=32/10(QS1)=$3.20 increases actual CPC
So, if your cost increases all of a sudden, then competition has improved too!
Competition is the name of the GAME…
Excellent info, this actually gives me motivation to improve my ads and make them more relevant to the keywords.
Great post video,
Thanks
Great presentation from Google!
Very simple to understand, and even easier to implement.
I think to many people fear the quality score to much, and they really should not worry so much.
As long as you provide relative content with relative keywords, with no spam, no useless links and good quality information, then you really have nothing to worry over.
The video basically says the same thing – - so it makes sense to follow it exactly.
Thanks again.
Sincerely,
John Adams
Honest Home Business
Thanks for sharing this video “Introduction to the Google Ad Auction”. Great information on PPC advertising on Google.
At least there is no secret anymore. Plain and simple to understand what you have to do to get those clicks.
landing page relevancy accounts for only 3-5% of quality score?! see my post
thanks a lot,
this has BUSTED so Many MYTHS
peace & clarity NOW
thanks again
eBay Sniper…
I came across your site while searching for eBay articles. I really liked what you posted! Thanks for taking the time to write about this topic….
Whoa! This is a good video! Really appreciate that Google has taken the time to share this. Thanks Yefi!
Thank you for this great video lesson on improving Quality Score.
It just reaffirms what I’ve been hearing. You need to work on getting your QS as high as possible to keep your costs down. Great video!
Thanks!
Thank’s for your information, It’s very interst to learning with this program
As Always great Video, these days I am focusing on creating great QS for my campaigns.
QUALITY is the name of the GAME!
Thank you for this information, I didn’t really understand it at all before.
Great information , I have read many times how adwords experts are able to reduce their cost per click based upon keywords. I see here clearly demonstrated the 3 components to cheaper costs per click. 1. Click thru rate, 2. Relevancy, 3. Landing page quality. That’s how it works , that’s how google decides a sites, page rank and ultimately the cost price per click. The higher the page rank (quality landing page) the cost per click is reduced. Not rocket science after all.
How can I further reduce my cost per click if my Quality Score is already at 10?
Very informative as far as it goes. However, I still don’t know how they determine the “Quality Score” of the landing page. He only briefly mentioned it. Is there some place we can get more info?
Great video! The only thing that keeps me thinking is that landing pages have so little importance in the graph… strange. I quite agree with u Dan…
Check this link for more info:
http://adwords.google.com/support/aw/bin/static.py?page=guide.cs&guide=23572&topic=23573
[...] and I thought it was pretty cool so here ya go,Here is link (not an aff link or anything btw) Introduction to the Google Ad Auction | PPC Bully Hope this helps someone! James [...]
In the video, at precisely 2:45, the chief economist says,
“by allowing USERS to Vote with their Clicks, we (Google) have millions of people helping us decide which Ads are the best for each search query”.
The obvious question that arises immediately to my mind is:
Does that mean that Google CANNOT determine the CTR Unless AND Until Google runs the Ad (of an advertiser) or Ads (of many advertisers) for a niche product be it “how to play piano” or “fat loss for idiots” ??
There is an interesting loop-hole here, if in-fact Google cannot determine the CTR before-hand, until and unless the ads must run first.
Nice stuff guys. I didn’t know the actual formula before. It’s cool to finally see how it’s broken down!
Sweet!
If your quality score is low for one campaign, will that affect your QS on other campaigns (drag them down)?
Thanx 4 grt info
Great Video,
I have a question that is probably minding you all:
How can i determine what is my current quality score for a single ad?
Or How can I compare a landing page to the way Google scores it?
Thanks.
what a great works. thanks for sharing..
Wow, has anyone noticed that this piece clearly shows Google hiding behind a veil of “we do it for the customers” while skewing their quality score for the largest companies? A full 60% of their quality score is devoted to “click through”, and though they say they are trying to avoid Spam etc. the click through is driven ONLY by two factors:
1: Known Brand Names will most always receive a higher click through rate. These are the largest companies.
2: Quality of the “come on” (add or whatever it is called). Also likely to be mainly best by the companies with the deepest pockets for research and follow through.
Together the above virtually guarantees the highest quality scores to the large companies who spend the most with Google. Further insidious (only due to the un-necessary spin by way of “explanation”) is the simple fact that “the higher the quality score the lower the cost per click” is mainly driven by MORE CLICKS, meaning of course way more money for Google – the real equation actually Higher Quality Score = Greater Google Profits! Not that profit ought avoided by ANY company who wants to stay in business mind you, just don’t couch it in “we listen to our constituents” lest you start appearing more like the government!
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Finally it is good to see that Google is explaining about what all of us kept guessing. Google formulas really do reveal Quality Score’s crucial role in the AdWords system and how you can spend less to get more.
Is there any website that can give us a lots of information like what was stated here? Thanks for the Idea…