AdRank is an important factor of Google Ads, especially if you want to get the most out of your budget (who wouldn’t?). If you understand AdRank correctly, you will be able to lower your cost per click, which is all we want in the PPC world!
What is Google AdRank?
Essentially, AdRank is the positioning of an ad on the Search Engine Results Page. Each time a user types something into a search engine, if your ad is deemed eligible then it will be entered into an auction. It is this auction that will determine your AdRank and this is calculated by Max. CPC bid x Quality Score.
We’ve written a handy post on exactly how the Google Ads auction works here.
Ideally you want to be aiming for positions 1-3, as an average of 41% of clicks will go to the top 3 paid ads on the search engine results page.
So before we get into all the nooks and crannies of AdRank, let’s discuss some terminology that I will be using:
A bid that you set to determine the highest amount that you’re willing to pay for a click on your ad. If someone clicks your ad, that click won’t cost you more than the maximum cost-per-click bid (or “Max. CPC“) that you set.
This is SO important, so pay attention. Quality Score is Googles ranking system out of 10. 1 being bad, 10 being the best thing since sliced bread. Remember the AdRank calculation I gave above; Max. CPC x Quality Score = AdRank. What this means is that the higher your Quality Score, the lower your CPC can be.
Your ads quality score is determined by many things such as your click-through-rate (CTR), relevance of keywords, relevance of ad text, landing page experience and your historical Google Ads account performance.
This is the percentage of how many people who have seen your ad end up actually clicking through. Google uses your CTR to determine how your ads and keywords are performing, so the higher the CTR, the better.
To begin to help you really understand AdRank, we will be looking at a table of 12 different advertisers, their Max/ CPC, Quality Score & AdRank:
|Advertisers||Max CPC (Bid)||QS||Ad Rank|
So, here we have our 12 advertisers and their final AdRank scores (Max. CPC x Quality Score). The higher the AdRank the better! This means you’ll be placed higher on the Search Engine Results Page. Let’s place the advertisers in order based on AdRank:
|Advertisers||Max CPC (Bid)||QS||Ad Rank|
We can see that advertiser 12 has the highest bid and a fair quality score of 6, so this advertisers ad will be placed in position 1. Looking at the table above, I hope it now makes sense when I say the higher your quality score, the less your bid can be.
It is important to remember that the advertisers who win positions 1-6 will be on the first page of the Search Engine Results Page and the advertisers who win positions 1-3 will be at the top.
Now let’s look into what the advertisers will actually pay:
|Advertisers||Max CPC (Bid)||QS||Ad Rank||Auction Position||Avg CPC|
Just because advertiser 12 has a bid of 12.87, it doesn’t mean they are going to be paying their full CPC, in fact far from it.
Essentially in short – you will only pay 0.01 more than the advertiser in the position below yourself.
Let’s take a look at advertiser 1, who has come last in the auction. Because they came last they will pay their Max. CPC and the advertiser above in most cases will pay 0.01 more.
However, this is where things begin to get complicated.
You can see that advertiser 1 will pay 2.12, but advertiser 2 will actually pay 1.18 (which is less than the advertiser in the position below). Confusing right, because I literally just said that each advertiser should only pay 0.01 more than the advertiser below.
Because advertiser 2 has a Max. CPC of 1.18 and a quality score of 6 their AdRank was higher than advertiser 1 who had a Max. CPC of 2.12 and a quality score of 2.
You will never pay more than your Max. CPC, therefore when we get to advertiser 2 the average CPC will essentially reset itself. From there you can see that every other advertiser only pays 0.01 more than the advertiser below.
Is your mind blown? Because mine is feeling quite frazzled.
Want to learn more about AdRank? Give us a call, we’re happy to help 🙂