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The Search Engine Marketing Ad Auction

One of the most enduring misconceptions about search engine marketing is that whomever has the largest advertising budget wins. Although a larger advertising budget can certainly be advantageous, especially when targeting highly competitive keywords, but it’s far from a requirement for success with search engine marketing. This is because all ads go through a process known as the ad auction before appearing alongside search results. For the purposes of this explanation, we’ll be focusing on the ad auction in Google AdWords.

How the Ad Auction Works

The ad auction process takes place every single time someone enters a search query into Google. To be entered into the ad auction, advertisers identify keywords they want to bid on, and state how much they are willing to spend (per click) to have their ads appear alongside results relating to those keywords. If Google determines that the keywords you have bid on are contained within a user’s search query, your ads are entered into the ad auction.

How Ads ‘Win’ the Ad Auction

Not every single ad will appear on every single search. This is because the ad auction takes a variety of factors into account when determining the placement of ads on the SERP, and because not every keyword has sufficient commercial intent to justify displaying ads next to results. However, the two main factors that Google evaluates as part of the ad auction process are your maximum bid and the Quality Score of your ads.

Maximum bid is the maximum amount you have specified you are willing to pay for a click. Quality Score is a metric based on the overall quality of your advertisement. Google calculates these metrics during the ad auction to determine placement of advertisements. The result of this calculation is known as ad rank.

 

The Importance of Quality Score in SEM

Given that Google AdWords’ Quality Score comprises half of the ad rank formula, it is one of the most crucial metrics search engine marketers can focus on. High Quality Scores can help you achieve better ad position at lower costs, because Google favors ads that are highly relevant to user queries.

In the table below, you can see that although Advertiser 1 has the lowest maximum bid, they have the highest Quality Score, meaning their ads are given priority in terms of placement during the ad auction:

 

 

 

Quality Score is arguably the most important metric in search engine marketing. To learn more about Quality Score and the impact it can have on your campaigns, read this resource at PPC University.

 

Succeed at Search Engine Marketing with WordStream

 

At WordStream, we eat, sleep, and breathe search engine marketing. Whether you’re a newcomer to paid search marketing or a seasoned professional, we want to provide you with everything you need to succeed at search engine marketing.

WordStream’s Google Ads Performance Grader

 

One of the most challenging aspects of search engine marketing is understanding which parts of your campaigns need attention and which are performing well. To find out how well your account is doing, try WordStream’s free Google Ads Performance Grader.

 

 

In 60 seconds or less, the Google Ads Performance Grader performs a comprehensive audit of your search engine marketing account and identifies areas in which immediate improvements can be made. Accounts are graded against 10 key search engine marketing benchmarks, including:

  • Wasted spend
  • Click-through rate
  • Quality Score
  • Negative keyword usage

The WordStream Google Ads Performance Grader is absolutely free, so get your grade today and start making immediate improvements to your search engine marketing campaigns.

 

 

 

 

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