Posted on: September 8th, 2017 by Staci Langel


Your AdWords campaigns are running, some people are seeing and clicking, you’re spending money, customers are finding and buying the products they want and need (Caretailing gone virtual!), all seems great. But how does it all work? How does Google decide whether your ad gets shown first, second, third or not at all?

The algorithms and formulas Google uses are very complex, and I couldn’t even begin to explain (or even understand) all the parts to it. But with a little practice and math, the basic parts of it are easy to understand and can give you a good idea of how it works.

So pull out your calculator, open up your AdWords account and let’s get started.

It All Starts with a Search

When someone does a Google search, Google looks at the words and phrases searched, then looks at the words and phrases advertisers have bid on to see if there are connections. If there is more than one advertiser bidding on relevant keywords, Google opens what they call an auction on those keywords.

Google then takes the most relevant keywords the advertiser selected and how much they want to bid – which is set by the advertiser when creating the ads – and the auction begins.

Determining Rank

Once you’re entered into the auction, Google looks at two factors to determine your ad rank: your maximum bid and your quality score.

MAXIMUM BID is the max cost per click the advertiser specifies for the keywords.

QUALITY SCORE is a relevance score Google gives. It takes into account your ad, your landing page and several other factors.  AdWords scores how relevant the landing page is to the ad, meaning the keywords in the content and meta need to somewhat match the ad.  The landing page also should be of good quality and focused on a specific product or category of products with clear calls to action such as phone number and/or form clearly displayed.

AD RANK = MAX BID x QUALITY SCORE – the highest ad rank gets the best position on the results page.

The auction looks something like this:

Max Bid X Quality Score = Ad Rank Position
Advertiser 1 $2 10 20 1
Advertiser 2 $3 5 15 2
Advertiser 3 $4 2 8 3
Advertiser 4 $7 1 7

As you can see, even though Advertiser 1 bid the lowest, they still got the first position because their quality score is so high. Had Advertiser 4 bid over $20, they would’ve gotten the first spot. This shows that good quality and relevance will allow you to have more effective campaigns and spend less to reach more people.

Show Me the Money

Now just because Advertiser 1’s max bid is $2, doesn’t meant that’s what he pays.  You pay the minimum amount you can pay for the position you win if your ad is clicked on.


Pull out your calculators again, and let’s use the same example.

Max Bid X Quality Score = Ad Rank Position Actual Cost per Click
Advertiser 1 $2 10 20 1 15/10+.01=   $1.51
Advertiser 2 $3 5 15 2 8/5+.01=    $1.61
Advertiser 3 $4 2 8 3 7/2+.01=    $3.51
Advertiser 4 $7 1 7

Again, Advertiser 1 made out the best because of their high-quality score and ended up paying less than what they actually bid.

So there you have it, the quick and dirty on how Google AdWords works and how your ads get ranked. The lesson of the day is relevance pays!

This process can be confusing and difficult to manage for anyone that’s already juggling a lot of responsibilities. If you don’t have a dedicated marketing professional checking and managing your AdWords daily, your results could take a hit. Luckily the experts at VGM Forbin have programs and tools to do exactly that – make your online presence work for you! Contact the VGM Forbin Online Marketing Team to learn more about how they can amp up your web presence.

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