Many beginners struggle to understand how to get to the top of Google Search results and how Google Ads figure out which ads to show.

What is Google Ads Auction?

Whenever someone searches for anything on Google it identifies which ads a user should see. Google uses the auction system to quickly figure out what ads will be shown where.

The result of this process boils down to an automated Ad Rank that Google assigns to your ads. 

As an advertiser, you should know what factors you can influence in order to get to the top of the Search Engine Results Page.

How Does the Auction Work?

There are mainly three factors that determine the final position of your ads:

  1. The bid itself
  2. Your ad Quality Score
  3. The potential impact of your ad extensions 

Your bid

Your bid is the maximum price you are willing to pay for a click on your ad. You might say the system is simple. You place the highest bid and you’re always on top, right? Wrong! The auction system used by Google is designed in such a way that you can’t win solely by bidding.

Google invest lots of effort to deliver the best and most relevant content to its users. Which means other factors come in play.

Quality Score

The most important metric here is your ad Quality Score. Check out our article on Google Ads Quality Score to learn more about it and how you can track it in Google Ads interface.

Quality Score is a metric Google uses to evaluate your ads in terms of how well they are done and how relevant they are for Goggle’s users.

Your ads are getting graded on a scale from 1 to 10. Learn more about Google Ads Quality Score from this article.

The main factors that are included in Google Ads quality score are: 

Ad relevance (This is the correlation between keywords you use in your ads’ settings and the actual copy that you use in your ad copy. Your ads should answer the potential questions that users are trying to solve by entering specific queries.)

Landing page quality (This one includes a variety of factors including keywords and how well your landing page answers specific search questions. Don’t forget to make your website and landing pages mobile-friendly).

Expected CTR (This is based on your historical CTR data so don’t forget to always optimize your ads for higher CTRs)

The potential impact of your ad extensions 

Google tries to predict how your additional ad information can affect performance. So, you have a chance of winning the auction with smaller bids and spending less money but compensating it with highly relevant keywords and extensions.

Google Ads extensions example
Google Ads extensions example

How Much Will You Actually Pay?

Actual CPC (Cost Per Click) can be less than what you have set as your maximum bid. This is due to the way the auction actually works. 

Auction Example

For example, if three advertisers are competing for the ad placements above search results. Two of them have met a minimum ad rank threshold of 40 and now they are competing with each other. 

If one of them has a higher Ad Rank they will pay the price of the last highest ad ranking advertiser + $0,01 (nearest billable unit). So, in the end, they will pay just enough to beat the competitor. 

As a result, your final price will be identified by a combination of factors and your max bid itself doesn’t guarantee you high placements.

This is the way Google is trying to encourage advertisers to invest more in the content of their ads and make sure they are delivering the best experience to their users.

What Are the Bidding Strategies?

Even though Quality Score plays a huge role in the results of an auction, you shouldn’t forget about bidding strategies. You choose a bid strategy depending on what you are trying to achieve advertising on Google. They can be used as ad placement regulators during the auction.

Again, strategies are based on your business objectives. If you know what you are trying to get out of the ad campaigns, you can choose a strategy that can lead you to it. For example, you may want to hold a certain position in the search results ad placements or you have a target conversion rate, Google and eLama can provide you with set strategies in order to help you meet your objectives.

All of the strategies can be divided into two categories:

Manual and automated strategies.

Manual Strategies

The manual strategy is pretty self-explanatory. You figure out the amount of money you are willing to pay, set the bids and check up on the campaign from time to time to see if everything’s working fine.

If you don’t know what the best price is, you can check out our smart bid calculator and use it as a reference. 

Automated and Smart Bidding Strategies

If you want to get the best results out of your Google Ads campaigns, you should consider using automated strategies provided by Google itself. 

These strategies are based on Google’s machine learning. Google identifies what kind of an audience is more likely to convert based on your business objectives and makes sure these people see your ads. 

It would be a good idea to connect your Google Analytics account with Google Ads in order to be able to track conversions. Alternatively, you can choose any suitable method of conversion tracking that makes sense for your business. 

You can also learn how to track the right conversions from this article.

Do this to unlock special automation strategies aimed at conversions. These are called Google Smart Bidding strategies.

Google has a few of those:

  • Target CPA (cost-per-acquisition)
  • Target ROAS (return-on-ad-spend)
  • Maximize Conversions
  • Enhanced cost-per-click (ECPC)

Learn more about them in this article.

This will help Google find users that are more likely to become your clients. Google will automatically raise your bids in order to make sure the users see your ads.

Other automated strategies allow you to get more impressions, maximize your clicks and maintain a certain position in search results' placements.

Bidding strategies
Bidding strategies

You can also use eLama bidding strategies if you want to have simplified control within the eLama dashboard.

You can choose a bidding strategy that is relevant to your overall business objectives.

For example, you can select a strategy that allows you to always stay on top of the ad placements. But be aware that you need to constantly work on your ads’ Quality Score in order to get the best deals and make your ads price efficient.

Remember that overheating the auction is not the best strategy in Google Ads. Your bidding strategy must compliment your QS optimization efforts in order to get the best results, without breaking the bank.

Conclusion

Now that you know the basics of how Google Ads auction works, you know how to optimize the price and performance of your campaigns. Don’t forget to check out our articles on how to track the right conversions and how to optimize your ads’ Quality Score.

Also, check out our Smart Bid Calculator to make sure that you are not overpaying for your ads.

 

PPC Marketing Specialist and Brand Evangelist