Confused About Google’s AdWord Auction? Think About Blue Pencils.

Blue pencils. Huh? Don’t worry, we’ll get there. But first let’s talk about how Google’s AdWord Auction.

How those Google ads work.

You know those ads that appear above or to the right of your Google search results? You have Google’s Second Price AdWords Auction to thank for them. Here’s essentially how it works: Companies bid on keywords or keyword phrases. The placement goes to the highest bidder, but they only have to pay the amount bid by the second highest bidder (ex: you bid highest at $10 and the second highest bid was $8.50 – you only pay $8.50 for the placement).But, like most things in tech, it’s not quite that simple. There’s more that goes into winning the auction than your bid. Google also factors in your ad quality score to create a ranking system.

What’s an ad quality score?

Let’s say we own a store called Pete’s Pencils and we sell blue pencils (Pete’s our father’s name, it’s a family business). We want to try our hand at buying some ad space on Google. After some pretty intense research, we find that the keyword phrase “blue pencils” is the term most often used by potential consumers looking to purchase blue pencils… like the ones we sell. Crazy! Now that we have the keyword phrase we want to bid after, we need to make sure we optimize our chance at winning that bid. The first way to do that is to make sure our ad has a high Google quality score.Google quality scores have three components: ad relevance, expected click through rate (CTR), and landing page experience. Let’s break those down.Ad relevance refers to how well the ad speaks to what the user is searching for. If the user is looking for blue pencils, and your ad says or is about blue pencils, then your ad relevance is high. But for a “blue pencils” search, an ad for blue cars would have a low relevance score.Expected click through rate is the likelihood that the user will click on your ad. The higher the ad relevance, the higher the expected click through rate. If a user is looking for blue pencils and your ad does a great job promoting blue pencils, they’re more likely to click on your ad. Landing page experience is all about how fast your landing page loads and how relevant is it to the search terms. Say the user clicked on your ad for blue pencils, but is redirectly to a used car landing site – that’s a poor landing page experience. Google is smart enough to pick up on this and, if your landing page experience is low, will jack up your cost per click and decrease the percentage of time your ad shows. Ouch.

Stick to best practices.

These three components act as a series of checks and balances that allow Google to make money, get your ads in front of the right people at the right time and help your brand drive volume and scale budget. The higher your quality score, the less money you’ll have to pay to win bids at Google’s AdAuction.We’ve used this example of “blue pencils” to illustrate the importance of not only creating ads that are specific and relevant to the keyword phrases you’re bidding on, but also the importance of the keywords themselves. Often, the product your business is selling is not going to be as simple and easy to define as “blue pencils.” Be sure to take the time and do the research to find out what keywords your target audience is using to search for your product or similar products.

Understanding the inner workings of Google’s AdWords and AdAuction is no small feat. But sticking to best practices and having proper account structure will allow you to maintain a high quality score, thereby driving more clicks for less money and, in turn, maximizing your profits. In short, quality score improves cost per click (CPC) which improves performance.Our media buying experts here at Hawke live and breathe this stuff and are always looking for ways to be most efficient when it comes to bidding. They also love to share their knowledge. If you’d like to learn more about media buying, head to our Media Buying page.