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Google AdWords: The Bidding Process

by | Jun 5, 2018 | AdWords | 0 comments

What are pay-per-click campaigns?

 

Branding is everything in today’s world of business. In order to effectively expand a brand’s reach on the digital front there are a number of different digital marketing tools available. One of the most popular tools of choice in the digital marketing realm are pay-per-click (PPC) campaigns. The most popular platform for PPC campaigns by in large is Google AdWords. Being the largest search engine in the world means that there are a lot of different businesses’ competing to be shown on the first page of a SERP (search engine result page) for specific search queries that are related to their products or services. After reading an article on Search Engine Land I found that the AdWords PPC platform brings in more than $100 million a day for Google.  Aside from being the PPC platform for the largest search engine in the world, another reason AdWords has its current level of popularity is the way in which the bidding process works for AdWords campaigns. It’s modeled in such a way that the quality of various components of the ad play a role in determining its ad rank. This in turn makes it so that having the deepest wallet doesn’t necessarily translate into the best rankings. Today’s post is about breaking down what PPC campaigns are, how are the bidding process on AdWords works, and things to consider when managing your own PPC campaigns.

 

Search engine optimization vs. Pay-per-click campaigns

 

Our previous blog post explained another one of the popular forms of marketing for your website which is organic search engine optimization (SEO). You can view that post here  Every website owner should ensure that it follows proper SEO practices in order to allow their various pages to rank well on the major search engines for search queries related to the different pages. It has been shown that the most trusted results on a SERP are the highest ranking organic results. Yet there is still an immense demand for pay-per-click campaigns, specifically AdWords campaigns. The reason for this is that that while users tend to trust high organic listings more, high-ranking PPC campaigns tend to show higher conversion rates. This is illustrated in a Moz article called ‘True or False: Organic Traffic Converts Better Than PPC.’ This is because users that are clicking on a PPC ad are more ready to spend money on a product or service they are searching for, whereas there is more shopping around and comparing when looking at organic results. That being said, those businesses that have both well optimized sites that follow the proper SEO practices and PPC campaigns on the go tend to the most traction with their digital marketing campaigns.

How winning advertisers are determined

 

So what is involved in creating an effective AdWords campaign? A lot of people think that it’s a sheer numbers game. The idea that in order to get a high ranked AdWords campaign for a competitive search query you need to outbid your competition. This isn’t the case! An AdWords campaign page ranking is determined by a metric called the advertiser’s Ad Rank. This metric is calculated by multiplying two key factors:

  1. Maximum Cost per-click (CPC) bid – the highest amount an advertiser is willing to spend on a click
  2. Quality Score – a value that takes into account your click-through-rate (CTR), keyword, ad and URL relevancy, and landing page quality

Taking this into account, the process for determining winning advertisers acts like an auction.

 

The process

 

Everything starts with the search query that a user enters when searching for a particular product or service. The search engine takes the keywords in the query and looks at the AdWords advertiser pool to determine whether there will be an auction. If there are one or more advertisers with campaigns that have keywords relevant to the search query then an auction is triggered.

What information is entered in the auctions?

 

When creating an AdWords campaign the advertiser selects keywords that they want to bid on, how much they want to spend on either cost-per-click or daily amount, and then create groupings of keywords that are paired with the ads.  From there Google will select the keyword(s) from your account that are most relevant to the particular search query, the maximum bid that was specified, and the associated ad with that keyword. It should be noted that only one entry from your AdWord’s account can be selected for each auction even if you have multiple ads that are relevant to that particular search query.

 

More information on how Google determines ad placements

 

As mentioned earlier there are two key factors when looking at determining where your ad will rank on Google. These are:

  1. Maximum Cost-per-click (CPC) bid
  2. Quality Score

 

To reiterate, your Ad Rank is determined by multiplying your maximum CPC bid with your quality score. There are three determining factors in determining your quality score:

 

  • Click-through rate (CTR) – A metric displayed in a percentage that shows the rate at which people click on the ad versus number of impressions
  • Relevancy – How relevant are your campaign’s keywords, ad & URL to the specific search query entered by the user
  • UX (user experience) – The quality of the landing page that the ad takes the user to. This is where having a well optimized page is key.

 

[table id=1 /]

Here it is clearly illustrated that having the largest bid amount does not directly translate into being selected first by Google.

 

So how does Google determine what you have to pay?

 

There is a formula that Google uses to determine exactly what your cost-per-click will be. The formula is as follows:

 

Your price = Ad Rank of person below you / Your quality score  + $0.01

 

If we take a look at the table that was posted above the cost-per-click for the advertisers is as follows:

 

Advertiser 1 = 16 / 10 + 0.01 = $1.61

Advertiser 2 = 12 / 4 + 0.01 = $3.01

Advertiser 3 = 8 / 2 + 0.01 = $4.01

 

By looking at this example it is clearly shown that advertiser 1 is able to pay less for a higher position because they have the better quality score. Meaning advertiser 1 most likely has a higher click-through-rate, keywords and a URL that are more relevant, and a landing page that has been fully optimized.

 

This process ensures that users can find relevant ads, advertisers can connect with potential customers at the lowest possible price, and Google makes an absolute killing in AdWords revenue.

 

Key points

 

  • Keyword relevancy is very important
  • Optimizing your landing page with persuasive, relevant content and a clear call-to-action tailored for specific queries is also important
  • Having a high quality score means you can get selected over other PPC campaigns that are willing to spend more. It’s not just a bidding war
  • Keyword lists that are most effective tend to have the following qualities
    • Relevant
    • Exhaustive: includes not only the most popular keywords in your nice, but also includes long-tail keywords. These keywords are more specific and add up to account for the majority of search-driven traffic. These also tend to be less competitive and therefore less expensive
    • Expansive: PPC is iterative so it is important to ensure that your campaigns are constantly being refined and that you are always adjusting according to the information you are receiving through Google AdWords

What is involved with managing PPC campaigns

 

Regular account activity is one of the best predictors for account success. Making some of the following adjustments with your PPC campaigns can go a long way in ensuring continual success and longevity with your campaigns:

 

  • Adding keywords: you’re not going to get the best keywords all in one go. It is important to update as you see more useful keywords pop up throughout your campaign
  • Adding negative keywords: Adding non-converting terms as negative keywords helps to improve campaign relevancy and it helps to reduce campaign spending on irrelevant keyword
  • Split ad groups: This helps to improve click-through-rate (CTR) and quality score by creating more targeted ad text and loading pages
  • Review costly PPC keywords: Be conscious of your budget by removing expensive, under-performing keywords from your keyword list
  • Refine landing pages: By modifying your content and calls-to-action (CTA) on your landing pages to align with popular search queries you will successfully boost conversion rates. Also, it is important to note that you should never send traffic to the same page for different ads. Be sure to tailor each landing page specifically for your various ads.

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At the end of the day we understand that managing your PPC campaign may be a task  your team don’t have time for which is why it is a service we offer under our ‘Digital Marketing’ category. If interested please feel free to fill out a free estimate form by going here.

I hope this post has helped out with understanding the Google AdWords bidding process a bit more clearly. Please feel free to leave any questions or comments below. Thanks for reading!

 

Return to the home page here

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Google AdWords: The Bidding Process

by | Jun 5, 2018 | AdWords | 0 comments

What are pay-per-click campaigns?

 

Branding is everything in today’s world of business. In order to effectively expand a brand’s reach on the digital front there are a number of different digital marketing tools available. One of the most popular tools of choice in the digital marketing realm are pay-per-click (PPC) campaigns. The most popular platform for PPC campaigns by in large is Google AdWords. Being the largest search engine in the world means that there are a lot of different businesses’ competing to be shown on the first page of a SERP (search engine result page) for specific search queries that are related to their products or services. After reading an article on Search Engine Land I found that the AdWords PPC platform brings in more than $100 million a day for Google.  Aside from being the PPC platform for the largest search engine in the world, another reason AdWords has its current level of popularity is the way in which the bidding process works for AdWords campaigns. It’s modeled in such a way that the quality of various components of the ad play a role in determining its ad rank. This in turn makes it so that having the deepest wallet doesn’t necessarily translate into the best rankings. Today’s post is about breaking down what PPC campaigns are, how are the bidding process on AdWords works, and things to consider when managing your own PPC campaigns.

 

Search engine optimization vs. Pay-per-click campaigns

 

Our previous blog post explained another one of the popular forms of marketing for your website which is organic search engine optimization (SEO). You can view that post here  Every website owner should ensure that it follows proper SEO practices in order to allow their various pages to rank well on the major search engines for search queries related to the different pages. It has been shown that the most trusted results on a SERP are the highest ranking organic results. Yet there is still an immense demand for pay-per-click campaigns, specifically AdWords campaigns. The reason for this is that that while users tend to trust high organic listings more, high-ranking PPC campaigns tend to show higher conversion rates. This is illustrated in a Moz article called ‘True or False: Organic Traffic Converts Better Than PPC.’ This is because users that are clicking on a PPC ad are more ready to spend money on a product or service they are searching for, whereas there is more shopping around and comparing when looking at organic results. That being said, those businesses that have both well optimized sites that follow the proper SEO practices and PPC campaigns on the go tend to the most traction with their digital marketing campaigns.

How winning advertisers are determined

 

So what is involved in creating an effective AdWords campaign? A lot of people think that it’s a sheer numbers game. The idea that in order to get a high ranked AdWords campaign for a competitive search query you need to outbid your competition. This isn’t the case! An AdWords campaign page ranking is determined by a metric called the advertiser’s Ad Rank. This metric is calculated by multiplying two key factors:

  1. Maximum Cost per-click (CPC) bid – the highest amount an advertiser is willing to spend on a click
  2. Quality Score – a value that takes into account your click-through-rate (CTR), keyword, ad and URL relevancy, and landing page quality

Taking this into account, the process for determining winning advertisers acts like an auction.

 

The process

 

Everything starts with the search query that a user enters when searching for a particular product or service. The search engine takes the keywords in the query and looks at the AdWords advertiser pool to determine whether there will be an auction. If there are one or more advertisers with campaigns that have keywords relevant to the search query then an auction is triggered.

What information is entered in the auctions?

 

When creating an AdWords campaign the advertiser selects keywords that they want to bid on, how much they want to spend on either cost-per-click or daily amount, and then create groupings of keywords that are paired with the ads.  From there Google will select the keyword(s) from your account that are most relevant to the particular search query, the maximum bid that was specified, and the associated ad with that keyword. It should be noted that only one entry from your AdWord’s account can be selected for each auction even if you have multiple ads that are relevant to that particular search query.

 

More information on how Google determines ad placements

 

As mentioned earlier there are two key factors when looking at determining where your ad will rank on Google. These are:

  1. Maximum Cost-per-click (CPC) bid
  2. Quality Score

 

To reiterate, your Ad Rank is determined by multiplying your maximum CPC bid with your quality score. There are three determining factors in determining your quality score:

 

  • Click-through rate (CTR) – A metric displayed in a percentage that shows the rate at which people click on the ad versus number of impressions
  • Relevancy – How relevant are your campaign’s keywords, ad & URL to the specific search query entered by the user
  • UX (user experience) – The quality of the landing page that the ad takes the user to. This is where having a well optimized page is key.

 

[table id=1 /]

Here it is clearly illustrated that having the largest bid amount does not directly translate into being selected first by Google.

 

So how does Google determine what you have to pay?

 

There is a formula that Google uses to determine exactly what your cost-per-click will be. The formula is as follows:

 

Your price = Ad Rank of person below you / Your Quality Score  + $0.01

 

If we take a look at the table that was posted above the cost-per-click for the advertisers is as follows:

 

Advertiser 1 = 16 / 10 + 0.01 = $1.61

Advertiser 2 = 12 / 4 + 0.01 = $3.01

Advertiser 3 = 8 / 2 + 0.01 = $4.01

 

By looking at this example it is clearly shown that advertiser 1 is able to pay less for a higher position because they have the better quality score. Meaning advertiser 1 most likely has a higher click-through-rate, keywords and a URL that are more relevant, and a landing page that has been fully optimized.

 

This process ensures that users can find relevant ads, advertisers can connect with potential customers at the lowest possible price, and Google makes an absolute killing in AdWords revenue.

 

Key points

 

  • Keyword relevancy is very important
  • Optimizing your landing page with persuasive, relevant content and a clear call-to-action tailored for specific queries is also important
  • Having a high quality score means you can get selected over other PPC campaigns that are willing to spend more. It’s not just a bidding war
  • Keyword lists that are most effective tend to have the following qualities
    • Relevant
    • Exhaustive: includes not only the most popular keywords in your nice, but also includes long-tail keywords. These keywords are more specific and add up to account for the majority of search-driven traffic. These also tend to be less competitive and therefore less expensive
    • Expansive: PPC is iterative so it is important to ensure that your campaigns are constantly being refined and that you are always adjusting according to the information you are receiving through Google AdWords

What is involved with managing PPC campaigns

 

Regular account activity is one of the best predictors for account success. Making some of the following adjustments with your PPC campaigns can go a long way in ensuring continual success and longevity with your campaigns:

 

  • Adding keywords: you’re not going to get the best keywords all in one go. It is important to update as you see more useful keywords pop up throughout your campaign
  • Adding negative keywords: Adding non-converting terms as negative keywords helps to improve campaign relevancy and it helps to reduce campaign spending on irrelevant keyword
  • Split ad groups: This helps to improve click-through-rate (CTR) and quality score by creating more targeted ad text and loading pages
  • Review costly PPC keywords: Be conscious of your budget by removing expensive, under-performing keywords from your keyword list
  • Refine landing pages: By modifying your content and calls-to-action (CTA) on your landing pages to align with popular search queries you will successfully boost conversion rates. Also, it is important to note that you should never send traffic to the same page for different ads. Be sure to tailor each landing page specifically for your various ads.

At the end of the day we understand that managing your PPC campaign may be a task  your team don’t have time for which is why it is a service we offer under our ‘Digital Marketing’ category. If interested please feel free to fill out a free estimate form by going here.

I hope this post has helped out with understanding the Google AdWords bidding process a bit more clearly. Please feel free to leave any questions or comments below. Thanks for reading!

 

Return to the home page here

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *