How Does PPC Ad Auction Work: A Brief Guide

ad auction

Many businesses want to get on the first view pages of Google, Bing, or another popular search engine and drive more traffic to their services. However, the order in which these engines show ads and whose they choose to show depends on several factors. A PPC ad auction helps.

You can have better success with your ads with pay-per-click management by Pure Digital Marketing, and award-winning techniques will help you make it to the top. Learn about how a PPC ad auction works and everything you need to know about applying to your own services.

What Is PPC Ad Auctioning?

PPC (Pay Per Click) ad auctioning is a process that search engines like Bing or Google use to decide which ads will run. The auction also determines the order of ads to show, but the search engine will only consider the ones that are providing services and products. Google and Bing do not have an ad auction for all topics people search, and instead focus on ones with “commercial intent” or that will garner business.

The PPC Auction Process

Your PPC bid is the amount of money you’ll spend on each person clicking on your ad. Some people bid on multiple keywords or one targeted one. Your bid amount factors into if Google will show your ad and how high in the search, but it is not the only factor that contributes to your ad’s visibility.

Ads also must be relevant to the search query, or they will not align with what the consumer wants answered. If someone is searching for home improvement businesses in their area, an ad for fashion and clothing brands is not relevant here. Finally, having a high ad ranking is important too.

Bidding in a PPC Ad Auction

Search engines like Google have a real-time auction where advertisers choose their bid amount. The maximum CPC (cost per click) depends on how must they will pay. Even if a competing page bids more than you, you may have a better-crafted landing page and higher click-through rate.

What Is Ad Ranking?

The advertiser with a higher ad ranking is more likely to reach the top of the page rather than someone with a lower rank. Google utilizes the ad rank of numerous advertisers and decides who to place on the page and where. The formula for ad ranking is as follows:

  • Quality Score x Maximum CPC = Ad Rank

You can think of it as combining your ad quality, how relevant it is to answer the query, bids, Ad Rank thresholds, and other expected impacts.

What Is CPC and How Do You Calculate It?

CPC (or cost per click) is the amount an advertiser pays for every person that clicks on their ad. You can calculate CPC with the following formula:

  • Ad Ranking of Advertiser Below Yours / Your Quality Score + $0.01 = CPC

Costs vary because the competitor’s ad rank below you is affected by the one below them, and so on. Therefore, variation is expected. 

What Is Quality Score?

Ads receive a quality score based primarily on three factors:

  • Estimated CTR: This number is how many times you estimate people will click on the ad.
  • Assessment of the Landing Page: Users need a good, relevant experience with an ad’s landing page.
  • Ad Relevance: Noted previously, an ad must relate to the search and targeted keyword with its commercial intent.

Advertisers can consider these factors and improve one or all of these areas to be more favorable to Google. Professionals believe that the CTR and landing page experience make up 80% of the score (~40% each), and ad relevance is the remaining 20%. Therefore, it makes the most sense to focus on the click-through rate and creating a more user-friendly, attractive experience with the landing page.

PPC Ad Auctions: The Key Takeaways

An auction outcome might not always have the impact you want, but it doesn’t mean you should give up. Improving the concepts that factor into your quality score, the relevance of your ad, and assessing your competitors are excellent next steps. Working with Pure Digital Marketing can take the mystery and confusion out of PPC ad auctions as a business with proven expertise and results.

Pure Digital Marketing Simplifies Keyword Strategies and SEO

Pure Digital Marketing can help advertisers implement effective PPC bidding strategies and increase the likelihood of ranking higher. Stay one step ahead of the competition by working with experts. Contact a Pure Digital Marketing team member today!

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