Here’s the short answer: Ad position is determined by the Rank Number. Rank Number is determined by your keyword CPC (or CPM), and your Quality Score. The higher your Rank Number, the higher your ad position.
Here’s the long answer:
What is Google’s Quality Score? It is a measurement of the relevance of an Ad.
Google’s definition of Quality Score: “This is the basis for measuring the quality of your keyword and determining your minimum bid. Quality Score is determined by your keyword’s clickthrough rate (CTR), relevance of your ad text, historical keyword performance, the quality of your ad’s landing page, and other relevancy factors.â€?
“Other relevancy factors� is undisclosed by Google.
“Quality of your ad’s landing page� is a call for SEO.
The first step in ranking each ad is calculating the “Rank Number�.
This is calculated by multiplying the Max CPC by the Quality Score.
For example, let’s say advertiser A is in position #1. And, advertiser B is in position #2.
To determine advertiser A’s rank number, we divide advertisers B “rank number� by A’s Quality Score. The result is the amount that would cause advertisers A ad to appear in Advertiser’s B position. To appear above that position, you simply add 1 cent to that amount. The results in the actual CPC. See below.
Confused?
Step #1 Calculate rank number. This is calculated by Max CPC * Quality Score.
Your actual CPC is the minimum amount to maintain a rank number , higher than the next lower ad.
Using the example above:
.65/1.8=.36 the result is the amount that would cause Adverstiser’s A ad to appear in Advertiser’s B’s position. To appear above that position, you simply add 1 cent to that amount. Which results in an actual CPC of .37 cents.
.65/1.8=.36 + 1 = Actual CPC
Remember: You only pay the CPC necessary ($0.01 more) to have a rank number higher than that of the next lower bid.
Important note: It is very possible to have a high Quality Score and actually pay less to appear in a higher position than your competitor. (Hint: Optimize those landing pages).
If you want to see the position where your ad will most likely appear, Google has made available the Keyword Traffic Estimator tool in your AdWords account.
No related posts.
March 15th, 2006 at
Shim - I am confused about the CPC. I assume that the - before the rank is established, the amount that I would pay is based similar to Yahoo auction. For instance:
B - Bid .65 True CPC .41
A - Bid .40 True CPC .26
C - Bid .25 True CPC .04 (or 1 cent more than the next bid)
but factor in the Quality Score - and the rank & true cpc would be:
A - rank=1 - true cpc .26 — ??? .37
B - rank=2 - true cpc .41 — ??? .39
C - rank=3 - true cpc .04 === .04 ok
Show how you achieved the CPC - thanks
March 15th, 2006 at
It starts with the lowest bidder, and takes into consideration the Minimum Bid which Google dictates. This is very different than Yahoo.
March 16th, 2006 at
so you are saying the cpc calc is some secret formula?
March 16th, 2006 at
To add a bottom-line consideration: Yahoo/YSM determines ad position based on “max bid” whereas Google does it based on how much your total clicks are worth over time. For example, with Google you might have a lower PPC bid but achieve a higher position because your CTR is greater - so your total ad spend is higher (i.e. Google’s revenues are higher.) Another reason why site-side conversion rate is *extremely* important for advertisers (as opposed to PPC click-thru rate).
March 23rd, 2006 at
[...] Start by increasing your keywords CPC for the purpose of increasing your CTR. Wait until you have a decent CTR. Then, drop your CPC below your competition. You should be able to maintain a higher position for a lower CPC because the history of your CTR will be taken into consideration to calculate your Quality Score and Ad rank. This is a temporary strategy, and is very similar to the PPC Strategy to lower your CPC, and increase your clicks. Google’s way of determining your ad position, and their hidden bid landscape, warrants a more aggressive strategy, constant monitoring, and testing. [...]
May 3rd, 2006 at
[...] It’s getting tougher and tougher to compete in Search Engine Marketing. So, the more sophisticated you can be, the better. This calls for writing highly relevant ads, building targeted keyword lists, optimizing your landing pages, and managing your bids. All these things will effect your Quality Score, Actual CPC, and Ad Position. Finally, don’t forget to mine your Web Analytics to discover your long tail of keywords. [...]
July 17th, 2006 at
[...] They calculate the keyword Min CPC by how the keyword has performed historically, and the “market rates”. “Market rates”…meaning the CPC’s are based on the positioning, and competitor prices, then taking into consideration a handful of other factors. Seasonality of keyword cost is also a consideration, and could artificially inflate the minimum cpc’s. If an advertiser bids less than this minimum cpc, then their ad is not served. This can be very tricky for advertisers using bid management software. You can bid up, but not down on certain keywords. Otherwise, the ads will just not be served, and you won’t receive any notification that your ad stopped serving. FYI: Ad Rank is calculated by Bid multiplied by CTR. [...]
November 16th, 2006 at
I have a specific keyword which shows 22 impressions with a ctr of 4.54%
with only 1 click.
The average position is 7.4 and my cpc is £0.08.
th3 site is a new website only went live 9 days ago, should i increase my cpc?