Google Ads uses an auction system to determine which ads appear in search results and on websites. Here’s how it works:
Keyword Selection:
You start by choosing keywords related to your business. For instance, if you sell shoes, you might bid on keywords like “buy running shoes” or “best hiking boots.”
Bid Amount:
You set a maximum bid amount, which is the most you’re willing to pay for a click on your ad for each keyword. This bid is part of the auction process.
Auction Process:
When a user performs a search or visits a site that is part of Google’s Display Network, Google runs an auction to decide which ads will be shown. This happens in real-time, instantly when the user’s query or browsing behavior triggers it.
Ad Rank:
Google doesn’t just use the bid amount to decide which ads to show. It combines your bid with your Quality Score to calculate your Ad Rank. Quality Score includes factors like ad relevance, expected click-through rate (CTR), and the quality of your landing page. Ads with higher Ad Ranks are more likely to be shown, even if their bid is lower than others.
Cost Per Click (CPC):
You don’t always pay your maximum bid amount. Instead, you pay just enough to beat the next highest bidder. This means your actual cost per click (CPC) can be lower than your maximum bid.
Budget Management:
You set a daily budget, which is the maximum amount you’re willing to spend each day. Google will adjust the frequency of your ads to ensure you stay within this budget, even if you get a lot of clicks in a day.
The auction system ensures that ads are shown to users based on relevance and bid amount, and it helps manage costs by only charging you when someone clicks on your ad.