How Does Google’s Ad Auction Work?

Bidding on ad space in Google can be a tricky business. Regardless of how much money you’re willing to spend, understanding the ad auction is key to making the most of your AdWords budget.

Where to Start

If you’ve never used AdWords before, we’ll begin with the basics:

• AdWords is Google’s advertising system. It allows advertisers to bid on keywords to make their clickable ads appear in the Google search results page. Google makes money out of AdWords by charging advertisers for clicks.
• Businesses can start bidding on keywords for pay-per-click (PPC) ads by creating an AdWords account.
• The success of your PPC ads will be influenced by the competitiveness of the keywords you’re bidding on and the relevancy of those keywords to your business.

Once you’ve figured out these fundamentals, getting the hang of bidding on keywords in AdWords is a piece of cake. (Well… sort of.)

How does the Google ad auction work?

Don’t let the intricacy of Google AdWords intimidate you. It might look complicated, but bidding on keywords doesn’t have to be difficult.

The Google ad auction works in a similar way to an actual live auction, but with less shouting and gavel banging. And instead of bidding on a house or antique, the item up for grabs is prime ad real estate in the SERPs.

Before you start throwing money at your AdWords account, it’s important to note that the bidding process isn’t entirely dependent on how much you can spend. Your website’s quality score also comes into play. Quality score is determined by a range of factors, including:

• Your click-through rate. Google rewards ads for getting lots of clicks.
• The relevancy of your keywords. The keywords you’ve chosen to bid on should be relevant to your business.
• The quality and relevancy of your site’s landing page (the page that users are directed to when they click on your ad)
• The relevancy of your ad text. Good ad text should include the features and benefits of your product or service and a call to action.

Remember our Brisbane AdWords Management team says – maintaining a good quality score is essential to getting bang for your buck in Google’s ad auction.

How does Google decide the winning bid?

Google determines the top bidder by measuring the minimum amount an advertiser is willing to spend per click against their quality score. If you come out on top in the auction, your ad will appear at the very top of the SERP. Getting your ad ranked in first place is no mean feat, especially if you’re bidding on an especially competitive keyword.

If you’re not sure how much to bid on a keyword, look at your profit margin (the amount of money you make from every sale). If you know your website’s conversion rate, you should be able to figure out how many clicks you need to make a sale. This will help you determine the maximum amount you should be bidding on keywords.

Getting the hang of AdWords is often a process of trial and error, so don’t be disheartened if it takes a little practice to get your ads ranked in first place. When it comes to the Google ad auction, persistence is key.