Google AdWords is a Pay-Per-Click advertising service. AdWords shows ads to people in the Google search results that are relevant to what they are searching. The best part of Pay-Per-Click (PPC) is that you are only charged when people actually click on your ads.
You get to set the price you pay for the clicks too! If you only want to spend ten cents each time somebody clicks on your ad, you can… Just don’t expect that much exposure if you set that low of a bid. Your ad’s position is based on a bidding system; the higher the bid, the higher your ad places on the right side of the search results. If your ad places in a top position consistently, Google will start placing your ad in the coveted top section, ABOVE the normal “organic” search results. View the example here to notice where the advertisements are located on a Google search page.
PPC and Setting the maximum bid
It is true that you can set what ever price you want for your ads, you can even set a cost limit per day across all of your ads and their keywords. What you are actually bidding on are “keywords” that you imagine a person interested in your website will search for. You can set a max bid for as many keywords as you like. Here is an example of how this works…
Let’s say three companies place a bid on the same keyword, they are company “A”, “B”, and “C”. Who ever has the highest maximum bid is the one that goes at the top of the ad column on the right side of the search results and then the others will follow below it.
The actual cost for everyone will depend on their placement, the low bidder pays their max bid, the next bidder up will pay $.01 (one penny) more, the next highest bidder will pay an additional $.01 (one penny) more also.
Now lets say that the max bid for “A” was 20 cents per click, “B” was 10 cents per click and “C” was 30 cents per click. The cost to each website advertiser would be the following if a person clicked their ad:
“B” was the lowest bid, they must pay their max bid of 10 cents
“A” was the next highest bid at 20 cents per click, they pay a total of 11 cents (one penny more than “B”)
“C” was the next highest bid at 30 cents per click, they pay a total of 12 cents (one penny more than “A”)
Now, with only three people in the bidding process, the costs can be very low. Well, as long as all the max bids are low that is. The prices really start to skyrocket when there are many bidders on the same keywords and everyone is trying to out bid each other. Sure you are only paying the lowest max bid plus one penny for each placement above them.. but if all the bids are going high to out bid each other then the low max bid in turn will be going up along with them.
Then Came the Quality Score…
Obviously the above example is very basic to say the least. But even though I wrote it back in 2007, the theory remains the same. Although one more variable that determines your ad’s rank and also your monthly cost is the Quality Score. Basically speaking, Google applies a “quality” rating to all keywords in your account, your keywords are awarded a higher Quality Score (QS) when they prove to have a good Click Through Rate (CTR). The opposite is also true when your keywords have a very low CTR and therefore will get a very low value QS.
Stop Throwing Money Down The Drain!
Your Quality Score has a direct effect on the amount you pay when a person clicks your ad. If your keyword has a high Quality Score, then your ad will rank higher on the page than others who are paying the same amount per click. In essence, you are rewarded for using relevant keywords, optimized ad text, and landing pages that have a good CTR.
Google’s formula for Quality Score —> (Quality Score) x (Max CPC) = (Ad Rank)
Example of Ad Rank with Quality Score:
You bid on a specific keyword and set a max bid of $1 and lets say you have a Quality Score of 7 out of a possible 10
1 x 7 = 7, So you have an Ad Rank of “7″
Now, your competitor bids on the same exact keyword, but they set a max bid of $2 and we’ll say that they have a Quality Score of 3 out of 10
2 x 3 = 6, So your competitor has an Ad Rank of “6″
In this example, YOUR AD will rank HIGHER in the results even though you will PAY LESS for the clicks! It’s a great system for anyone who is able to create high quality Ad Text and Landing Pages that are relevant.
So, what are you waiting for? Contact Us Now & Get Optimized for Quality Score!
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