How does the ad auction work

In the next section of the PPC guide, we will see how the ad auction works. Search engines do not display ads for every query, but when the engines identify a query with commercial intent (a user is looking for information about a service or product), an auction takes place shortly after the user submits their query.

Several factors determine this:

  • The auction qualification of an advertiser.
  • The next order where eligible ads appear on the page.
  • How much each advertiser will pay if their ad is clicked.

Your bid: The first factor is how much an advertiser is willing to pay for a click. Advertisers set the maximum bid (called maximum CPC) they are willing to pay. Bids can be set at the individual keyword level or at the ad group level (a group of related keywords).

Its relevance: Search engines aim to show ads that users really want to click on. If the ad is relevant, the user will have a poor experience and the tools will lose revenue from the ad clicks. This is where the second element of ad relevance comes in.

An ad's Quality Score is a combination of related factors, which we'll look at next. When an ad qualifies for an auction, the tools do the math:

Max CPC X Quality Score = Ad Rank

This determines where the ad will appear on the page.

What is Quality Score?

Quality Score indicates the relevance of the experience to a user and plays an important role in where an ad appears in search results and how much advertisers pay per click. Advertisers don't see the actual quality score of their ads, but Google shows an external quality score of 1 (poor) to 10 (excellent) at the keyword level in AdWords. As the Quality Score improves, the cost per click (CPC) may decrease and/or improve the average position.

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Google considers three things when calculating quality scores:

  • Expected click-through rate (CTR), which reflects the likelihood that a user will click on an ad.
  • Ad relevance to the query. The ad copy must clearly relate to what the user is looking for.
  • Landing page experience. Are users redirected to a page that reflects the intent of the query, and does the page provide a good user experience?

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How does Google consider each quality score factor?

Google is just beginning to reveal the elements of the quality score to advertisers. After analyzing a large set of quality score data exported from the AdWords API, Brad Geddes, founder of AdAlysis, reverse-engineered the formula for quality score surfaces in an AdWords account. This is still relevant today for understanding where to focus your attention when optimizing your ads and landing pages.

How does ad auction PPC work
Quality Score in PPC Ads

Here's how the weight of each quality score factor is calculated:

  • Landing page experience: 39%
  • Expected CTR: 39%
  • Ad relevance: 22%

This gives us a plan to prioritize paid search optimization efforts to increase Quality Score. Advertisers should focus on improving CTR by first testing the ad copy and landing page experience (which means improving speed, choosing a more relevant page, etc.), website engagement, and reducing bounce rate. Then focus on testing ads to improve query relevance. In 2017, Google began displaying historical quality score data in the interface to help advertisers analyze how changes affected their scores.

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What is Ad Rank?

Ad Rank = Ad Quality Score x Max CPC [+ sự kết hợp của các yếu tố khác, bao gồm ngữ cảnh tìm kiếm như thiết bị và tác động dự kiến ​​của tiện íchở mị]

Ad Rank determines where to display ads that enter the auction. The better the ad rank, the better the position. The best ad rank gets the top ad position. It takes into account the advertiser's ad quality score and maximum CPC, as well as the expected click-through rate (CTR) impact of available ad formats and extensions. This is just the basic formula.

How is CPC calculated?

Ad Rank has a big impact on the actual cost-per-click (CPC) an advertiser pays when someone clicks on their ad. It is often mistaken that advertisers pay a penny more than advertisers in a position below them. In fact, this is just part of the CPC calculation. CPC is calculated using this formula:

CPC = Below Advertiser Ad Rank/Quality Score + US$ 0.01

In AdWords, because pricing is partially based on the next competitor's Ad Rank, actual CPCs can vary greatly. Ad Rank (Maximum CPC bid x Quality Score) determines where an ad appears. Ad Rank is calculated against the actual CPC an advertiser will pay if someone clicks on their ad.


Above are instructions on how to bid on PPC ads. If you have any questions, don't forget to leave a comment below, we'll help you answer them. In the next article on PPC related knowledge, we will cover what you need to set up your PPC account and campaign. Stay tuned to see how to set it up!

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