Adversting generally refers to television commercial, newspaper Ad, billboard Ad. Google AdWords means advertising on Google. It is an online advertising service developed by Google. When you would use Google AdWords as your advertising tool, your advertisement would appear on Google search result page either with a brief advertising copy or video content. For example, you are using AdWords as your advertising medium. When someone conducts a Google search that is relevant to your products or services then your Ad can appear on the top or bottom of the Google search result page.with a word “Ad”.
AdWords is the main source of revenue for Google. In 2012, the main search engine of the world earned 43.7 billion US dollars from this online advertising platform. Source Wikipedia.
How does the AdWords auction work?
AdWords auction occurs by the below steps:
- AdWords’ advertiser keyword pool: Advertisers identify keywords that they want to bid on, how much they want to spend and create a grouping of these keywords. This grouping of keywords is called AdWords’ advertiser keyword pool.
- Trigger an auction: When someone searches for something on Google, it looks at the AdWords’ advertisers pool and determines whether there will be an auction. Please note that here search queries and keywords are not the same. A keyword is, for example, buy recondition car. But searchers can type purchase recondition car, buy recondition car in Dhaka, buy recondition car in Sylhet. For every such search query, Google will start an auction for the keywords ” buy recondition car”. This is called triggering an auction.
Now think about a situation that many bidders are participating in the auction with the same keywords buy recondition car. They all want their Ad to appear on the first place of Google search result page. So how will Google determine that? It is the Ad rank that determines which Ad will appear in the first place.
3. Ad rank: Once your Ad is entered into the auction Google looks at two factors to determine Ad rank: your maximum bid and your quality score. The maximum bid, also known as CPC bid, is the number of dollars you specify for your keywords. Your quality score is a metric that determines how relevant and useful your Ad is to the user. The higher your quality score, the better is your Ad. Finally, Google calculates the Ad rank by the below equation:
AD RANK= CPC BID X QUALITY SCORE
The Ad with the highest Ad rank will appear on the first place of Google search result page. An example will clarify it.
Consider there are two advertisers. All three entered into the auction with a keyword, for example, pet food. Here is their Ad rank:
Ad Rank for advertiser 1: $2x 10=20
Ad Rank for advertiser 2: $4x 4=16
So advertiser 1 with Ad rank 20 would get the higher ranking than the advertiser 2.