- The AdWords auction determines the position of ads based on the advertiser's maximum cost-per-click bid (Max CPC) and Quality Score. A higher Quality Score and competitive bid can result in a higher ad position even with a lower bid. - Quality Score is a measure of how relevant, useful, and providing of a good user experience an ad and landing page are based on click-through rate, relevancy of keywords and ads to searches, and landing page quality. - In the example given, Scott's ad would show in first position because it had the highest Quality Score and competitive Max CPC bid, even though Alison and Jon bid higher amounts. Actual cost-per-click

1. How Google Ranks Ads

2. In this section we’ll cover... • How the AdWords auction works • How Google calculates your place in the auction • What’s Max CPC? • How Quality Score is calculated • How all this affects what you pay for a click

3. How does AdWords work? Quality Factors: Clickthrough rate, keyword relevance, ad relevance and historical performance

4. Everyone wants to be in position #1 The position of each ad is determined using a ranking formula.

5. The magic ad ranking formula Ad Rank = Maximum Cost-Per-Click Bid (Max. CPC) The Bottom Line: x Quality Score If you have a great Quality Score, you can still show in a high position with a low bid

6. What is your Max CPC? • The maximum price you are prepared to pay for a click • Your ‘bid’ in the AdWords auction

7. What is Quality Score? • A measure of how relevant and useful your ads are. • Do your ads & keywords provide a good user experience? POOR OK GREAT Note: The above example is for demonstration purposes only. It is not meant to indicate the actual quality score of the ads.

8. Quality Score measures user experience

9. How Google calculates Quality Score Clickthrough-Rate (CTR) Of the people who saw your ad, how many clicked on it? + Relevancy Do your keywords match your ads? Does the search query match your keyword? + Landing Page Quality Does your landing page provide a good user experience?

10. You can see your Quality Score for each keyword

11. The magic ranking formula - example Alison, Scott and Jon are all bidding on the keyword ‘zipline kits.’ Based on their Max CPC and Quality Score, whose ad will show in first position? Alison Scott Jon Ad Rank 8 = 10 = 7 = Max CPC Quality Score $1.00 x 8 2nd $1.00 x 10 1st $2.35 x 3 3rd

12. How much do I actually pay? Your actual CPC is the Ad Rank of the advertiser below, divided by your Quality Score. Ad Rank Max CPC Quality Score Actual CPC Scott 10 = $1.00 x 10 = (8/10) $.80 Alison 8 = $1.00 x 8 = (7/8) $.88 Jon 7 = $2.35 x 3 = minimum $min

13. So you’ll show in a higher position if... • Your Quality Score is at least 7/10 for each keyword • Your bids are competitive • Both!