How does an auction work in Google Ads contextual advertising?

How the contextual advertising auction works Contextual advertising

In order to select advertisements for impressions, and at the same time set the cost per click, contextual advertising auction Google Ads is used. Its purpose is to show the target audience the most relevant ads. Using special algorithms, the system selects the most suitable ones, simultaneously determining the cost per click.

There is limited space for advertising on search results pages and partner sites. Therefore, for a specific user at a certain point in time, the Google Ads auction selects the desired ad and algorithmically assigns a cost per click on it.

The result of auctions depends not only on the price that the advertiser is willing to pay. Unlike the usual auction, where the highest bid wins, Google Ads takes into account other indicators, which will be discussed below.

How does the Google PPC auction work?

The ad auction determines the most suitable ads using a rating, which is calculated by multiplying the bid that the advertiser is willing to pay by the quality score. The latter is calculated automatically and depends on:

  • Intended CTR;
  • Declaration matches the keyword;
  • Landing page quality and relevance

Ad rank can be expressed as:

Ad Rank

CPC bid is the highest bid per click set for a keyword.

Ad rating is the degree to which an ad meets user expectations, showing the level of usefulness for him.

Your position will depend on these indicators: the higher they are, the better. To understand how the Google Ads auction works, consider an example:

How the Google AdWords auction works

It can be seen from the table that advertiser #4’s ad will be shown last, even though advertiser bids the highest.

If your ad ranks higher than your competitors as a result, you win the auction by paying the minimum cost per click.

But how do you determine the cost an advertiser pays? The Google AdWords system, unlike Yandex.Direct, when ranking ads and setting prices per click, uses not only its relevance, but also the quality of the landing page. The cost per click is calculated using a method similar to the GSP auction:

How cost per click is determined

In addition, the rating of other advertising campaigns and the quality level of the winning ad are taken into account.

In theory, using the recommended Google Ads bids, you can be in the right position. But given that the CPC is calculated on the basis of daily statistics, this cannot be guaranteed. After all, competitors in contextual advertising do not sit idly by and influence auctions by changing the rate per click.


How to win an auction in Google Ads?

Unlike a classic auction, it is not enough to set the highest bid to win in Google Ads. Conversely, higher bids can force competitors to adopt a squeezing strategy. This is when losing advertisers start bidding up on purpose. And they do it not to win, but to increase the cost per click for the winners.

How to learn how to win Google AdWords auctions with the optimal bid and the highest profit? Use in AC settings:

  1. The exact match of the query in both body and headings. This increases the CTR and visual response of the user. Moreover, the ranking depends on the CTR of ads;
  2. High quality ads. The text should contain the necessary information, contain the necessary keywords and call the person to action;
  3. Low and mid-frequency queries. The competition for such keys is low. You should select them on different services, as well as use those offered by the system. This tactic will help you increase conversions while saving money;
  4. Landing page quality. The landing should meet the needs of your target group as much as possible;
  5. Cautious rate hikes. To get guaranteed ad impressions and clicks, do not raise rates higher than 20-30% of those offered. This will prevent the auction from “heating up”;
  6. A/B testing. Test different ad texts for the same query. The system will display them one by one. In a few days, using this method, you can choose the best option with maximum CTR;
  7. Exclude negative keywords. Removing untargeted queries for a campaign will save your budget;
  8. Fine targeting settings. Considering the interests of your audience, you can set the time range and regional reference as accurately as possible.

Hint! Protect yourself from “pulls”. If you notice an increase in the cost per click, lower your bid or stop showing for a couple of hours. This may be a special provocation of competitors who want to spend your entire budget in this way.

A simple increase in bids is not enough to guarantee winning the auction. You need to think through all the little things and create high-quality ad text, as well as landing page content.

Сергей Шевченко
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Sergey Shevchenko Google Logist GoogleLogist
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