Understanding the Adwords auction process

As online advertising continues to be a more prominent source of revenue for both big and small businesses the importance of Google’s Adwords advertising program has also increased, emerging as the premiere method of advertising on the internet. Despite this rise in useage, many businesses still lack a thorough understanding of exactly how the Adwords process works, which is to say, they are likely spending a significant amount of advertising money on something they do not completely understand. No wonder then that many campaigns are not nearly as successful as they could and should be.

Yesterday, Wordstream released a Google Adwords specific infographic in which the Adwords auction process is explained for potential clients in an easy to follow presentation. The infographic illustrates precisely how Google determines which ads will be shown and how much money the ads will cost (click image for full printable version).

While the infographic is relatively easy to follow and understand, a simple explanation of Adwords can be defined as follows: The Adwords auction process is structured so that all bidders can win; an Adwords bidder need only pay the minimum amount required to beat out the person below them.

When you use Adwords, your ad will appear along the very top or along the right hand side of the organic Google search engine results. The rank of your ad is directly related to your traffic and your traffic is related to a number of relevant factors:

Quality Score – Rating that search engines assign to each keyword chosen by an advertiser
Click Through Rate (or CTR) – Percentage which expresses how many people are seeing your ad and then clicking it
Bid Price – the price per keyword an advertiser is willing to spend to gain a click
Ad Relevance – Relevance of the text in an ad in relation to keyword

Also in direct relation to the factors shown above is the landing page. It makes very little sense to go through the time necessary to set up an Adwords account and attain and drive traffic that ultimately takes a user through to a page that is not relevant to the ad they’ve just clicked on – you’ve wasted their time, and worse, you’ve wasted a part of your budget. The landing page is often the ‘Achilles Heel’ of many Adwords campaigns – a sensible course of action would be to have these pages built around the following criteria:

– Easy to navigate
– Load quickly
– Keyword enriched content relevant to the searched word

Landing page relevance factors heavily into Quality Score; quality score affects cost per click (CPC) as well as eligibility in the keyword auction process.

Each step of the Google Adwords auction process informs the the next step required to build and maintain a successful Adwords campaign. If you are an advertiser considering using Adwords to expand revenue, get up to speed and ensure you have a thorough understanding of how the entire process works before you spend any time or money on a campaign. Understanding the auction process is the first step towards success.

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