How The Adwords Keyword Auction Works

In Paid Search by Andrew Bloch

The Adwords keyword auction may look incredibly complicated when you first start digging into it. There are various factors that are taken into consideration, and to think that this all happens in a matter of milliseconds, is quite astonishing. So, how does it all work? Well, this article is going to try and explain it to you in the simplest way possible so that you have a greater understanding of just how the Google Adwords keyword auction works.

How the Adwords Keyword Auction Starts

Before the Adwords Keyword Auction begins, it needs to be triggered. How is it triggered? The whole process is triggered by a simple search query typed into the google search engine bar. A simple query will start the whole keyword auction process which allows google to ensure the most relevant ads appear according to the query that has been searched for. It is important to note that queries are not necessarily keywords, for example searching for “where can I buy running shoes,” may trigger various ads that are also related to sports equipment and fitness.

What Gets Entered into These Auctions

When an advertiser is setting up a Google Adwords account, the advertiser will choose certain keywords they want to bid on. Advertisers will research the most relevant keywords for the account they are working on. Once the advertiser has chosen the keywords they would like to use, they decide how much they are wanting to spend each time their ad appears and is clicked on. To carry on with our example above, you may be working on an account for a client, and this client sells various top quality shoes, ranging from running shoes to formal shoes. Your keywords for running shoes may be, “sports shoes,” “running shoes,” “activewear,”…etc. When a person types in the query above, “where can I buy running shoes”, your keyword “running shoes” may be entered into the Adwords Keyword auction, but only that keyword will be entered, and none of your other keywords will be entered into the auction.

How Does Google Determine which Ad is Shown Where?

This part of the auction may get a little bit confusing, but it will be explained as simply as possible. Once your keyword has been entered into the auction, Google will look at two key factors with regards to your ad. Firstly, Google will look at your maximum bid on your keyword that triggered the auction, and secondly, Google will look at your quality score. Before carrying on, let’s quickly take a look at what quality score is. Quality score is a metric that will determine how relevant and useful your ad is to the user. This will be determined by the CTR, or click through rate, as well as the landing page, or URL, that you have placed with your ad. It is always important to make sure that your ad takes the user to exactly where they want to go on your website, therefore ensuring that your landing page is correct, is essential in ensuring you have a good quality score. The combination of your quality score and your maximum bid will get you the best position possible in terms of ad rank.

How Does Google Determine the Cost?

Even though you have set your maximum CPC, or cost per click, this is the same as your maximum bid, it does not necessarily mean that you will pay the maximum amount you have set each time, you will generally pay a bit less. To explain this part can become quite complicated, but this explanation will be kept as simple as possible. Basically, Google will determine how much an advertiser will pay by looking at the ad rank of the person below you and divide that amount by your quality score, and then they add on $0.01, and that determines how much you will pay. Keep in mind that you will only pay if the user clicks on your ad. You may have a low maximum bid in comparison to other advertisers, but if your quality score is better than there’s, you will have a higher ad rank than the other advertisers. Always keep in mind to constantly make sure your ads are relevant, as this will determine your quality score.

For more information check out the article from Wordstream on “What Is Good AdWords” or give us a call and we can walk you through the process or explain how Kaomi Marketing can help you.