How does the Google Ads auction determine which ads are shown

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The Google Ads auction is a critical process that determines which ads are displayed for each search query, as well as their position on the search results page. This process is designed to ensure that users see relevant ads and that advertisers have a fair opportunity to display their ads to potential customers. Here’s how the Google Ads auction works, focusing on the context of keywords:

1. Triggering the Auction

  • Keywords: Advertisers choose keywords they believe are relevant to their business and that potential customers might use when searching for their products or services.
  • Search Query: When a user types a query into Google that matches or is related to the advertisers’ keywords, the Google Ads auction is triggered.

2. Entering the Auction

  • Ad Eligibility: Not all ads that target a specific keyword will enter the auction every time. To participate in an auction, an ad must meet certain criteria, including being eligible to show in the target location, being targeted towards the user’s device, and other ad settings.
  • Ad Rank Thresholds: Google sets minimum thresholds for ad rank, a metric that determines whether an ad is eligible to be shown. Ads that don’t meet these thresholds won’t enter the auction.

3. Calculating Ad Rank

  • Bid: Advertisers set a maximum bid amount, which is the most they’re willing to pay for a click on their ad. However, this is not the sole determinant of ad placement.
  • Quality Score: Google evaluates how relevant and useful your ad and the website it links to are to the user, based on the keyword’s relevance to the ad, the expected click-through rate (CTR), and the landing page experience.
  • Ad Rank: This is calculated using the advertiser’s bid, the Quality Score, and the expected impact of extensions and other ad formats. The formula for Ad Rank is not publicly disclosed, but it essentially involves these factors.

4. Determining Ad Placement

  • Highest Ad Rank Wins: The ads with the highest Ad Rank secure the top positions on the search results page. The actual position of an ad also depends on the competition and the availability of ad slots.
  • Cost-per-Click (CPC): Advertisers pay when someone clicks on their ad. The actual CPC is calculated based on the Ad Rank of the next highest ad below theirs divided by their Quality Score, plus one cent. This means you often pay less than your maximum bid.

5. Dynamic Process

  • Real-Time Auction: The auction is a dynamic and real-time process, with ad ranks recalculated each time a relevant search query is entered into Google.
  • Continuous Optimization: Advertisers can improve their chances in the auction by optimizing their ads’ relevance, improving landing pages, and using ad extensions. Higher Quality Scores can lead to lower costs and better ad positions.

In summary, the Google Ads auction is a complex system designed to balance the needs of advertisers with the goal of providing relevant, useful ads to users. Success in the auction depends on both the amount an advertiser is willing to bid and the relevance and quality of the ad and its landing page.

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