How Does PPC Work on Google Adwords

Understanding Google Adwords

When a query is performed on Google, Adwords automatically kicks in and looks at related keywords that advertisers bid on. A determined quality score is associated with the keyword and the cost per click (CPC). Keywords that have a quality score below 4 are not eligible for auction. As a result no impressions are received at all.

How to Compute AdRank

Each advertiser with Google is given an AdRank that is computed by the following formula.

{Max. CPC * Quality Score = AdRank}

How Google’s Auction System Works

A difference exists between your max CPC and actual CPC. The actual CPC paid for a click differs from the max CPC and calculated by the AdRank from the advertiser in the lower position divided by the quality score. Here is what the formula looks like.

{Actual CPC = Competitors AdRank / Your Quality Score}

It is not clear how the minimum price is determined, but it is suspected that the quality score, historical click to rate of the keyword and display URL play a role in that calculation.

Understanding how the auction system works can save the advertiser money in the long run. By raising your quality score, you will not only lower your costs but also improve your position for the ad.

Google SERPs and Ad Extension

Sometimes ads are shown at the top of organic search results. However, these have to meet certain standards and cannot be bought. These spots are earned by the advertiser and offer sitelink extensions and seller rating extensions.

Sitelink Extension
These are found on the ad extensions tab and allow for additional links to be provided that direct the user to specific pages such as a coupon page, featured product collection page, and more.

Seller Extension Rating
This is added automatically. In order to receive this, the URL must have at least 30 unique reviews and four or more starts on Google Product Search.

Location Extension
This is helpful for local businesses and can be created through an existing Google Places Account or by manually entering the address. Multiple addresses can be used as well.

Product Extension
The product extension allows the highlighting in SERPs of an existing Google Merchant Feed directly in the Google Search ads. The products shown are automatically picked by Google and cannot be manipulated or influenced in any way. In order to use this feature, the Google Merchant Account has to be connected with Google Adwords.

Top 3 Ways to Optimize Your Adwords Campaign

Here are three easy ways to make adjustments to your current Adwords campaign and optimize your results.

1. Make your Ad Groups highly targeted.
You should always use two ad variations for ad group. Keep the maximum number of keywords per ad group around five and define a semantic group around the “seed-keyword.”

2. A/B Testing of your Ad copy
Use clever ways to rest variants to your ad. CTR is not always the best one. Consider the confidence percentages while experiments should be solely based on data.

3. Use Clever Bidding Strategies
Use smart bidding strategies such as these three simple rules to follow.

• Pause keywords when the time period is 30 days, you have less than 200 impressions and the click through rate is less than 1 pecent.
• Pause text ads when the time period is 30 days, the number of impressions is less than 200 and the click through rate is less than 1 percent.
• Raise the max CPC to a first page bid estimate when the time period hits 30 days, your average position is less than 1.8 and the quality score is less than 4.

Understanding how your quality score is impacted by Adwords will help you target the specific areas needed to raise your position, save you money, and improve your click through rate. By following the three simple rules outlined above, you will inadvertently raise your quality score and offer you opportunities to expand your Adwords with additional extensions through Google SERPs.