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Contents
Google AdWords Auctions Explained
Google Ads operates on a real-time auction system, which determines ads that will appear on the search results page and their positioning. The basic overview involves your budget, search volume and the competition on selected keywords. If you can image a real life auctioneer whereby the product is a search query and you are bidding against your competitors to get an ad in front of the searcher.
Just like an auction, the winning ad placement is the one which spends the most to secure the item (the click). The outcome of this system is what is a known as a CPC (Cost Per Click), or the final price paid for the traffic. Fortunately, Google doesn’t charge you until someone clicks on your ad.
Auction Factors
Building on from the basic idea of the auction system, there’s a few deeper factors which impact Google AdWords cost.
Ad Bidding
When you create a Google Ads campaign, it will require a daily budget. The platform will use this budget to display ads, which then incur a CPC once clicked. Keyword value, supply & demand are the rank factors that will ultimately determine the final cost per click, however you do have some controls on the ad bidding.
Firstly, Google will never spend more than your daily budget over a month period (it can fluctuate day by day). However, for more granular control you can also set a maximum CPC, the most you are willing to pay for a click on an entire campaign, ad set or even single. But beware, if your competitors are willing to spend more then you might not get traffic!
Keyword Value
It makes sense to price high-value keywords as more expensive than ones of lesser value. But outside of supply & demand (covered below), what influences a keywords price? Google is an extremely smart platform, with an even smarter algorithm. It knows the types of keywords, which create strong profits on your end when converting customers. For example, keywords for lawyers are more expensive than searches for carpet cleaners, simply because the revenue is far higher. However, the keyword price is also factored by the intent. Intent being sales, informational or entertainment oriented. Sales searches are going to create more competition, driving the price up further and therefore the CPC higher.
Supply & Demand
Now that you’ve done the high-quality keyword research, you’re targeting the right customers searches. Unfortunately, so are your competitors. The continual shift between supply and demand is exactly what builds the Google AdWords Auction System.
Supply is determined by search volume, which can fluctuate heavily depending on your industry and exact product/service. On the flip side you and your competitors are the demand, created by your budget in what you’re willing to spend to acquire the searches and subsequent clicks. The rapid ability for these to change is why high-performing Perth businesses choose Google AdWords Management.
Ad Rank & Quality
While Google does reward the highest bidders as an auction should, it also pays to have a high-quality ad. Google’s job is to provide the best solution to a problem in the form of a landing page. If you create highly relevant ads, with great user experience on the website, then you’ll get a discount on your CPC through Ad Rank. This rank scales you and your competitors to calculate the best and most relevant ads based on user data. Google would rather serve a high-quality ad at a cheaper CPC then a poor one at a higher cost.
Get Expert Support
If you’re new to Google Ads or are looking to start paid advertising, and maybe don’t have the budget or time to play around on the platform, it’s a good idea to get expert advice. Our team have spent considerable time and budget on Google Ads, which means we can help you avoid the common mistakes so many business owners often make.
Contact our team for help and advice with your Google AdWords Management today.
