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Understanding the Google Ads Auction & Why Ad Rank Is Important

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Understanding the Google Ads Auction & Why Ad Rank Is Important


The author’s views are entirely his or her own (excluding the unlikely event of hypnosis) and may not always reflect the views of Moz.

There are 3.5 billion searches on Google every day, and 84% of people use Google at least three times per day to search for information.

When there is a search query on Google, Google Ads runs a quick auction to determine which ads will show for that search query, and what the ad positions should be. This ad auction is repeated every time an ad is eligible to appear for a search term out of the billions searched each day.

To determine if an ad is eligible to be shown in the Google search results, and what the position of the ad will be, Google uses a value called Ad Rank. If an ad does not meet the Ad Rank thresholds, it will not be shown. Ad Rank also determines the CPC (cost per click) that the advertiser pays for a click on their ad.

In this post, I cover the main factors that are used by Google to determine the Ad Rank of an ad during the auction, and what those factors mean for your ad strategy.

Understanding the Google Ads auction

How the Google Ads auction works

When a user makes a search query, Google Ads runs a split-second auction of all the ads whose keywords are relevant to it. This will determine which ads are eligible to be shown, their ad position relative to competing ads, and the CPC that the advertiser will pay for a click on their ad.

When setting up Google Ads pay per click (PPC) marketing campaigns, advertisers identify which keywords they want to bid on and set their max CPC bid. The advertiser also sets up ad groups with keywords and creates related ads.

When there is a search query, the Google Ads auction begins. Here is the auction process according to Google:

  • For every search query, Google Ads finds all the ads whose keywords are relevant to the search terms.

  • The system ignores ads that are not eligible for that location and any disapproved ads.

  • The remaining ads will be evaluated based on their Ad Rank. The Ad Rank is based on the max CPC bid, ad quality, Ad Rank thresholds, search context and the ad extensions and formats used.

The eligible ads that won the auction are shown on the SERP based on their Ad Rank.

The layout of the Google search results page changes constantly. Currently, Google shows three ads above the organic search results and three ads below the search results on each search page. Depending on the popularity of the search term, and the number of qualified ads, ads may be shown on multiple search pages for the search term.

Here is an example of a search for “eye doctors Dallas” that shows three eligible Google Ads above the organic search results:

Figure 1: Ads shown above organic search results for a search query

What is Ad Rank?

The ad with the highest Ad Rank will be shown in the top position of the search results page for a relevant search term. This is followed by the ad with the second highest Ad Rank and so on. Ads that do not meet the Ad Rank eligibility requirements will not be shown on Google.

Ad Rank calculation

Ad Rank = Max CPC Bid x Quality Score plus additional factors like the impact of ad extensions and ad formats, Ad Rank thresholds, search context, and competitiveness of auction.

Thus, spending more does not necessarily guarantee you the best Ad Rank. Here is an example of basic Ad Rank calculations for four advertisers competing for ad positions in the Google Search Results:

Figure 2: Calculating Ad Rank
Figure 2: Calculating Ad Rank

As seen in the example, Advertiser 1 had a lower max CPC bid than the other three advertisers, but was able to qualify for the top ad position because their quality score was high. Advertiser 4, in contrast, had the highest max CPC bid but the lowest quality score, and ended up in the lowest ad position.

Why should you care about your Ad Rank?

Google sets minimum Ad Rank thresholds that will determine if an ad is shown at all on Google.

In the example in Figure 2 above, there are four advertisers competing for an auction with Ad Ranks of 24, 20, 12, 8. If the minimum Ad Rank to show above the organic search results is 20, only Advertisers 1 and 2 will show above the search results. If the minimum Ad Rank to show below the search results is 10, only advertiser 3 will show below the search results. Advertiser 4 will not meet the minimum Ad Rank thresholds, and their ads will not be shown on Google at all.

Advertisers compete to have their ad shown in the top-most position on the SERP since that leads to a higher clickthrough rate (CTR) and results in more leads. Ad CTR changes considerably depending on your ad position.

The average CTR across all ads on Google Ads is 3.17% in search. But that CTR ranges considerably depending on industry and position, with a “good” CTR for position 1 being 6% or higher.

Even those minor differences in percentage can equate to thousands of clicks more for higher-ranked ads.

With that in mind, let’s dig into the two main factors determining your Ad Rank a bit more.

What is CPC?

Cost per click (CPC) is the price you pay per click on your ads in your pay-per-click (PPC) marketing campaigns.

When you set up a Google Ads PPC campaign, you set the max CPC bid for the keywords in your account. The max CPC bid can be set up at the keyword level or at the ad group level:

  • The maximum CPC is the maximum amount that you’re willing to pay for a click on your ads.

  • The actual CPC is the final amount you’re charged for a click on your ad. Your Actual CPC is determined at the time of the auction and may be less than the max CPC amount.

  • The average CPC is the average amount you’re charged for a click on your ads.

While CPC costs can vary depending on your industry, the average CPC in Google Ads is $2.69 for search and $0.63 for display.

CPC pricing is also called PPC or pay-per-click. Hence, Google Ads is called PPC or pay-per-click advertising.

How Ad Rank affects actual CPC

Ad Rank also affects the actual CPC you pay for a click on your ads.

Google Ads uses a second-price auction system. The actual CPC you pay is calculated at the time of auction based on your Quality Score and the Ad Rank of the advertiser below you, plus $0.01. Because the auction is dynamic, the actual CPC can vary with each auction.

Google does not disclose the details of how they calculate the Average CPC for Google Ads. According to Search Engine Land, the Actual CPC you pay for a click on your ad is determined at the time of the auction by the following formula:

Actual CPC = (Ad rank of Advertiser below/Your Quality score) + $0.01

Figure 3: Calculating Actual CPC values at each ad position
Figure 3: Calculating Actual CPC values at each ad position

What is Quality Score?

The Quality Score is a diagnostic tool that is used to estimate the overall quality of your ad compared to other advertisers.

Ads and landing pages that are considered more relevant and useful to the search query get a higher Quality Score. This helps to ensure that more useful ads are shown at a higher position on the SERP.

Quality Score is measured on a scale of 1-10, and is available for every keyword. It is based on historical impressions for exact searches of your keyword.

Three factors that determine Quality Score

Quality Score is calculated based on the performance of three main factors:

Expected CTR

The expected CTR is a prediction of the ad clickthrough rate when the ad is shown on Google. Expected CTR projections are based on user CTR, which helps to decide which ads will perform best when shown for a search query.

CTR is the number of clicks your ad receives divided by the number of times your ad is shown: CTR=clicks/impressions.

Landing page experience

The landing page experience measures how relevant and useful your website landing page is to the person who clicked on the ad.

Ad Relevance

Ad relevance measures how well your ad matches the user’s search intent. It ensures that only the most useful ads are shown for every search query, and prevents ads that are unrelated to the product or service from being shown for a search query.

Each of the three Quality Score factors is given a rating of “Above Average”, “Average” or “Below Average”.

In addition to the three factors above, Google considers additional factors during the real-time auction such as the type of device used, location of the user, time of day, impact of ad extensions, and more.

How to check your Quality Score in Google Ads

Google Ads provides four Quality Score status columns at the keyword level to check Quality Score:

  • Quality score

  • Landing page experience

  • Expected CTR

  • Ad relevance

To check your Quality Score in your Google Ads account:

1. Log in to your Google Ads account

2. Click on “Keywords” in the left menu

3. Click on the “Columns” icon in the upper right corner of the table

4. Click on “Modify columns for keywords” and scroll to the Quality Score section. Add the following components to your table metrics (see Figure 4):

  • Quality score

  • Landing page experience

  • Expected CTR

  • Ad relevance

Figure 4: Modify columns for keywords to add Quality Score columns
Figure 4: Modify columns for keywords to add Quality Score columns

5. Click Apply

6. Once these columns are added, scroll to the right on each keyword in the table to check the Quality Score and its components (see Figure 5).

Figure 5: Quality Score status columns in the keywords table
Figure 5: Quality Score status columns in the keywords table

7. If there is a “-“ in the Quality score column, it means that there are not enough searches that exactly match your keywords to determine the Quality Score for that keyword.

For information on improving your Quality Score, read these tips from Google.

Conclusion

The Google Ads auction is a real-time auction that is triggered with every search on Google to determine which ads will be shown for that search term, and in what position. The Ad Rank and Quality Score of the ads are important factors in the ad auction and help to determine whether an ad is eligible to be shown on Google. By improving the individual components of Ad Rank and Quality Score, you can improve the eligibility and rank of your ads.



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State of Content Marketing in 2023

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State of Content Marketing in 2023

I just pressed send on the manuscript for my book to be released in September. It’s called Content Marketing Strategy (snappy, eh?), and Kogan Page will publish it.

Last week, marketing professor Philip Kotler wrote the foreword. I won’t spoil it, but he mentioned the need for a strategic approach to owned media.

He writes, “(T)he company doesn’t carry an account of showing these marketing assets and their value. As a result, the company cannot show the CEO and company board members a return on owned assets or content.”

Luckily, my upcoming book shows exactly how to do that. Funny how that works out.

In any event, all this struck me that now is an opportune time to look at where the beloved practice of content marketing stands today.

First, let’s go back to 1999 when Kotler published Kotler On Marketing, one of his more than 70 books. The latter 1990s – a time of tumultuous change – fueled most of the thinking for the book. But he knew that it was merely the beginning.

Kotler concluded the book with a section called “Transformational Marketing.”  In the next decade, he wrote, “marketing will be re-engineered from A to Z. Marketing will need to rethink fundamentally the processes by which they identify, communicate, and deliver customer value.”

Well, it’s taken over two decades, but it’s finally happening.

Consumers have changed, but marketing operations are just starting to

In case you didn’t notice, almost every marketing conference these days starts with the same four or five requisite slides:

  • Digital technologies, such as search and social media, empower consumers today.
  • Consumers research, engage, buy, and stay loyal to brands in ways that have fundamentally changed.
  • First-party data and privacy are of the utmost importance.
  • Artificial intelligence begins to threaten the idea of the usefulness of search and pressure companies to deliver better and more personalized experiences.

You get it. Consumer expectations in the age of the social, mobile, and AI-driven web are different than they were.

However, the continuing challenge in 2023 is that content and/or marketing operations in enterprise companies are only beginning to evolve. Most marketing departments have remained as they were when Kotler wrote his book — they still work from mid- to late-20th century hierarchies, strategies, and processes.

Most marketing departments still work with mid- to late-20th-century hierarchies, strategies, and processes, says @Robert_Rose via @CMIContent. Click To Tweet

Content marketing isn’t new, but a content marketing strategy is

For hundreds of years, businesses have used content to affect some kind of profitable outcome. But the reality is this: Whether it was John Deere’s The Furrow from the 1800s, Michelin’s guide to car maintenance in the early 1900s, or even Hasbro’s GI-Joe partnership with Marvel in the 1980s, content was not — and is not for the most part now — a scalable, repeatable practice within the function of marketing. In short, companies almost always treat content marketing as a project, not a process.

That fundamental change will finally take hold in 2023. It could happen because of the digital disruption and ease by which you can now publish and distribute content to aggregate your own audiences. It could happen through the natural evolution that the ultimate outcome – more than the marketing – matters more.

As we roll through 2023 and beyond, content — and the exponentially increasing quantities of it produced by every organization — deeply affects not just your marketing strategy, but your business strategy. Content in marketing is now bigger than simply content marketing, and it should be dealt with as a component of that business strategy throughout the enterprise.

#Content in marketing is bigger than #ContentMarketing. Treat it as a component of the business strategy, says @Robert_Rose via @CMIContent. Click To Tweet

In 2023, the No. 1 focus of my consulting and advisory practice these days: help companies transform content into a repeatable, scalable, and measurable function that drives value through a multi-channel strategy. It’s bigger than publishing a blog, creating a lead-generating resource center, or sending an email newsletter. Today’s content marketing team is being absorbed into marketing because marketing and its various operations are fundamentally transforming into a content-producing machine.

It is not good enough to produce content “like a media company would.” The goal must be to operate as a media company does. Your job is not to change content to fit new marketing goals. Rather, your job in 2023 is to change marketing to fit the new business content goals.

Your job in 2023 is to change #marketing to fit the new business #content goals, says @Robert_Rose via @CMIContent. Click To Tweet

The unaware builds a case for the aware

The term “content marketing” continues to evolve. Even today, I run across those who still call it “brand publishing,” “custom content,” or “inbound marketing.”

My take matches with what Kotler described in 1999. I always thought the term “content marketing” would become part of “marketing” more broadly. In 2023, that happened. So, returning to the lexiconic debates of 2013, 2014, or 2015 doesn’t seem terribly productive. Content marketing is just good marketing, and marketing is just good content marketing.

That said, two kinds of companies do well at the broader view of content marketing. Some of them, such as Cleveland Clinic, Red Bull, Arrow Electronics, HubSpot, and REI, have purposely devised content marketing strategies as differentiating approaches to their marketing. They are succeeding.

Others, like Amazon, Microsoft, JPMorgan Chase, and Peloton, backed into a smart content marketing strategy. But executives at those companies probably don’t recognize it as such. If asked (and some have been), they would say acquiring or launching a media company operation was just a smart business strategy to diversify their ability to reach their consumers consistently.

They’re right, of course. Many have yet to read books about content marketing, been influenced by the Content Marketing Institute, or even recognize content marketing as a separate approach (as far as I know). And they are also succeeding.

Consider this proof: As I write this article, six companies have a market capitalization of more than $1 trillion. Four of the six wholly or partially use the business model of media creation to further marketing and business strategies. Apple, Microsoft, Alphabet, and Amazon are all, in part, media companies that also sell products and services.

Why would you not avail yourself of that same model?

The future looks cloudy and bright

As for the overall state of enterprise content marketing, it’s in transition, as all marketing is. As a focused project-based approach, working in ad-hoc ways across a business, content marketing appears to have proven its worth. Hundreds of entries every year to the Content Marketing Awards feature myriad case studies using content marketing techniques in strategic ways to profitably affect business results.

And yet, it remains to be seen whether you can make content marketing a scalable, repeatable, measurable function within marketing.

As to what the discipline’s future holds? At last year’s Content Marketing World, one of my favorite events, the Executive Forum gathered senior leaders from brands succeeding with content marketing. As we talked about the future, one participant said: “The only certainty is change. I can’t tell you where or when, but I do know there will be change, and this is the principle we build on now.”

As for my take, Kotler’s idea of transforming the marketing function seems to have gotten lost along the digital road traveled by marketers. In so many cases, marketing – and especially content – remains just an on-demand service function within the business. Its sole job is to produce ever more voluminous amounts of content that describe the value of the brand (or its products or services) so that sales can sell more efficiently, customer support can serve more effectively, and all manner of customer interfaces are more beneficial to both sides.

However, and maybe because I need to rationalize now that my book is finished, I passionately believe it’s finally time for marketing to reclaim its ability to create value — not just reflect it in the polished shine of your traditional products and services.

Almost 27 years ago today, Microsoft founder Bill Gates wrote an essay called Content is King. In it, he said that “(C)ontent is where I expect much of the real money will be made on the Internet, just as it was in broadcasting.”

It certainly was one of his more prescient moments. Nearly three decades later, his words have proven true. The essay title has become the rallying cry for thousands and thousands of entrepreneurs who now make their living on creating, managing, optimizing, and measuring content on the internet. (A Google search for “content is king” nets more than 1.7 million results.)

But it’s the last line of his essay that I find the most visionary: “(T)hose who succeed will propel the Internet forward as a marketplace of ideas, experiences, and products – a marketplace of content.”

That’s what content marketing is for me in 2023. It’s just marketing – optimizing the value of ideas, experiences, and products in a marketplace of content.

Time to get to work.

It’s your story. Tell it well.

Get Robert’s take on content marketing industry news in just five minutes:

https://www.youtube.com/watch?v=videoseries

Watch previous episodes or read the lightly edited transcripts.

Subscribe to workday or weekly CMI emails to get Rose-Colored Glasses in your inbox each week. 

HANDPICKED RELATED CONTENT:

Cover image by Joseph Kalinowski/Content Marketing Institute



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27 Best About Us and About Me Page Examples [+Templates]

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Your about page summarizes your history, values, and mission — all in one place. That’s a tall order for just a few paragraphs. If you’re feeling stuck, turn to these about-page examples for inspiration. 

about us page example: laptop held in palm of hand

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MARKETING

MarTech’s marketing operations experts to follow

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MarTech's marketing operations experts to follow

Marketing operations is what makes the magic happen. These are the folks who see that your martech stack doesn’t get stuck. They are the maestros, modelers and makers who make sure the trains run, the data is digestible and that you have the programs you need. Where would we be without them? That’s too scary to think about. Here’s our list of MOps experts who have the ear of the profession.

Darrell Alfonso

Darrell is director of marketing strategy & operations at Indeed and the former global marketing ops leader for AWS. He’s the author of “The Martech Handbook: Build a Technology Stack to Acquire and Retain Customers.” In addition to speaking at many conferences, Darrell was named one of the Top Marketers in the US by Propolis 2022 and among the “Top Martech Marketers to Follow” in 2020 by Martech Alliance. He’s a regular and popular contributor both to MarTech and the MarTech conference; you can find all of his articles at this link.


Eddie Reynolds

Eddie has been in business a long time, starting his first company when he was 14. “A pretty minimal enterprise,” he told one interviewer. “I had a tax ID number, a legal entity, and a company name. I even had the IRS coming after my dad for sales tax that I failed to report properly.” Today he is CEO and revenue operations strategy consultant of Union Square Consulting. He publishes The RevOps Weekly Newsletter and the podcast RevOps Corner. Eddie’s large LinkedIn following attests to the quality of the insights he shares there on  sales, marketing, service, and admin roles. 


Sara McNamara

Sara is an award-winning marketing and sales operations professional whose work has been recognized by awards from the likes of Salesforce (Pardot), Adobe (Marketo), Drift, and LeanData. She is a Senior Manager, Marketing Operations at Slack and a martech stack (+ strategy) solution architect. That and her passion for leveraging technology and processes to improve the experiences of marketers, sales professionals, and prospects, explains why she’s a regular guest on MOps podcasts.


Ali Schwanke

Ali is the CEO and founder of Simple Strat. The firm specializes in helping companies get the most out of HubSpot — from CRM strategy and setup to marketing automation and content creation. She is also host of HubSpot Hacks, “the #1 Unofficial YouTube show for HubSpot Tutorials” and has been a guest speaker at the MarTech conference.


Mike Rizzo

Mike’s career in marketing operations showed him that there is a real and significant MOps community. That’s why he founded MO Pros/MarketingOps.com, the fast-growing online community for people in marketing operations. He is also co-host of Ops Cast, a weekly podcast. 


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About the author

Constantine von Hoffman

Constantine von Hoffman is managing editor of MarTech. A veteran journalist, Con has covered business, finance, marketing and tech for CBSNews.com, Brandweek, CMO, and Inc. He has been city editor of the Boston Herald, news producer at NPR, and has written for Harvard Business Review, Boston Magazine, Sierra, and many other publications. He has also been a professional stand-up comedian, given talks at anime and gaming conventions on everything from My Neighbor Totoro to the history of dice and boardgames, and is author of the magical realist novel John Henry the Revelator. He lives in Boston with his wife, Jennifer, and either too many or too few dogs.

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