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Digital Marketing - Study Notes:

The bid auction

How much you actually pay is decided in what’s called a bid auction. The bid auction is what Google Ads uses to determine how all of the different advertisers who are trying to bid for a particular click will pay. So suppose there are, for example, three different advertisers, each bidding different amounts for a particular keyword. Based on things like the quality score, the historical data, and other factors around the advertising account, the landing page and different things like that, these advertisers will end up paying different amounts than they’re actually willing to pay based on these factors, and Google decides that for you. This determines your position on the page, whether you’re at the top of the page or in the middle or wherever. And this is decided using the measure of what’s called ad rank.

Ad rank

Your ad rank is decided by your maximum CPC bid.

The ad rank is calculated by multiplying your maximum by your quality score. That will determine where you sit in the page compared to your competitors.

Quality score

Your quality score is very important. It is a metric that was introduced in 2005. It is assigns to your keyword based on its CTR, its bid, and its landing page relevance. So again, we’re thinking landing pages, bids, we’re thinking CTR as historical based on what your CTR has been over time, and Google’s able to assess your landing page. But having a high quality score means Google Ads thinks that your ad, your keyword, and your landing page are all relevant to that particular user. And if you have a high quality score, you get rewarded for that.

Your quality score is the most impactful way to cost-effectively increase the position of your keywords without drastically affecting your bids. Having quality landing pages and quality ads is easily the most effective way to affect where you rank on the page. And AdRank is the factor that Google uses to determine what position you’re going to end up in after the bid auction is complete.

Bids are set at the maximum you are willing to pay for a click. Sometimes you’ll pay a little more or less than your maximum bid and this can be because of several reasons including:

  • Maximum CPC of competitors bidding on one keyword: The most influential factor is how much an advertiser is willing to pay for a click. The number of advertisers competing for a keyword drives up the price paid for a click in relation to their maximum CPC bid. This will vary across verticals and seasonality.
  • Your quality score for that keyword vs. your competition: If an advertiser has a good quality score they pay less for a click. than a competitor with a lower quality score as Google rewards advertisers with good quality scores.
  • Estimated CTR: This is determined by Google.
  • Landing page relevance: This is the relevance to search term and ad (as determined by Google.) 

If we keep these four elements in mind when you know optimizing towards a constrained budget or just trying to drive efficiencies in our account, it will impact positively on the amount we pay and the efficiencies that we drive into the account.

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Cathal Melinn

Cathal Melinn is a well-known digital marketing director, commercial analyst, and ecommerce specialist with over 15 years’ experience.

Cathal is a respected international conference speaker, course lecturer, and digital trainer. He specialises in driving complete understanding from students across a number of digital marketing disciplines including: paid and organic search (PPC and SEO), analytics, strategy and planning, social media, reporting, and optimisition.  Cathal works with digital professionals in over 80 countries and teaches at all levels of experience from beginner to advanced.

Alongside his training and course work, Cathal runs his own digital marketing agency and is considered an analytics and revenue generating guru - at enterprise level. He has extensive local and international experience working with top B2B and B2C brands across multiple industries.

Over his career, Cathal has worked client-Side, in digital marketing agencies and media owners with brands including HSBC, Amazon, Apple, Red Bull, Dell, Vodafone, Compare the Market, Aer Lingus, and Expedia.

He can be reached on LinkedIn here.

Data protection regulations affect almost all aspects of digital marketing. Therefore, DMI has produced a short course on GDPR for all of our students. If you wish to learn more about GDPR, you can do so here:

DMI Short Course: GDPR

The following pieces of content from the Digital Marketing Institute's Membership Library have been chosen to offer additional material that you might find interesting or insightful.

You can find more information and content like this on the Digital Marketing Institute's Membership Library

You will not be assessed on this content in your final exam.


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