bidding and ranking
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bidding and ranking |
Advertisers need to determine the maximum they are willing to pay for a click on their advert, and they need to decide this for each keyword they enter for an advert. This bid is the maximum CPC, or Max CPC, that the advertiser is willing to pay for the click.
However, this will not necessarily be the CPC that the advertiser must pay for a click.
Every time a search query is entered, the search engine runs an auction to determine the placement of the adverts where advertisers have bid on that search term. This auction is known as a Generalised Second Price (GSP) auction, which is a variation on the Vickrey auction.
In the GSP auction, each advertiser will pay the bid of the advertiser below him, plus a standard increment (typically $0.01), for a click on their advert.
Say three advertisers, A1, A2 and A3, bid $2.50, $3.00 and $2.35 respectively on the same keyword. The search engine has set a minimum price of $2.05 on that same keyword. Here is how the adverts would be positioned, and what they would each pay for a click:
However, this will not necessarily be the CPC that the advertiser must pay for a click.
Every time a search query is entered, the search engine runs an auction to determine the placement of the adverts where advertisers have bid on that search term. This auction is known as a Generalised Second Price (GSP) auction, which is a variation on the Vickrey auction.
In the GSP auction, each advertiser will pay the bid of the advertiser below him, plus a standard increment (typically $0.01), for a click on their advert.
Say three advertisers, A1, A2 and A3, bid $2.50, $3.00 and $2.35 respectively on the same keyword. The search engine has set a minimum price of $2.05 on that same keyword. Here is how the adverts would be positioned, and what they would each pay for a click:
When it comes to ranking, of course, it’s not quite as simplistic as that (it rarely is!). As well as the bid an advertiser places on a keyword, the search engine will take a number of other factors into account. In the case of Google AdWords, this is known as Quality Score.
The Quality Score is determined by, among other factors:
The relevance of the keyword to the search term
The relevance of the advert copy to the search term
The relevance of the landing page to the search term
The historic CTR of that advert
Search engines look at factors such as relevancy to try to ensure that it is not just having deep pockets that can land advertisers the top spot. Search engines need to ensure that users find the adverts relevant, otherwise they’ll be less likely to click on them – and no click means no revenue for the search engine.
The Quality Score is determined by, among other factors:
The relevance of the keyword to the search term
The relevance of the advert copy to the search term
The relevance of the landing page to the search term
The historic CTR of that advert
Search engines look at factors such as relevancy to try to ensure that it is not just having deep pockets that can land advertisers the top spot. Search engines need to ensure that users find the adverts relevant, otherwise they’ll be less likely to click on them – and no click means no revenue for the search engine.
