Are you confused about how the Google Ad Ranking algorithm works? One of the most common questions I am asked as an Google Ads Manager is ‘How does it work out how much I pay per click’?

In this article I reveal how Google Ad Ranking is calculated and how you can dramatically make a difference to your Ad Position.

How Is The Google Ad Ranking Calculated?

An environmental charity has just been awarded a Google Ad Grant and wants to find and expert to manage their campaigns to ensure they get the best return on investment so they go to Google and type.

At this point Google will trawl through all the paid ads that have been set up that include these keywords. Once it has done this it needs to rank the ads based on the following:

• Your bid, which is how much you’re willing to spend
• The quality of your ads and website
• Expected impact from your ad extensions and other ad formats

Here are two examples of ads that may appear in the search results, in reality there would be hundreds or even thousands competing for the top spots.

As you can see, the Marketing with Ethics Ad perfectly matches the exact keywords used in the search and includes Ad extensions and takes the searcher to their page dedicated to Google Ads management. Due to the quality of the keywords and expected user experience, Google has given them a Quality Score of 9/10.

Mikes Marketing, on the other hand, has similar keywords, but not a perfect match AND has no Ad Extensions. They also send all their ads to the homepage (don’t be fooled by the URL you see in the ad as this is a display URL only and not the final destination). As the user experience is expected to be lower, Google has given them a much lower Quality Score of just 2/10.

Marketing with Ethics have set a maximum bid on this keyword of £4.00 per click, but Mikes Marketing is willing to spend twice that amount with a maximum bid of £8.00 per click. In most situations, you would think that Mikes Marketing would automatically get better placing as they are spending twice the budget, but in Google land this isn’t enough.

Let’s add Dave’s Digital with a Max bid of £2.00 and Quality Score of 6/10 & Angie’s Ads with a Max bid of £6.00 and Quality Score of 4/10 and the overall ranking would look like this:

The basic Google Ad Ranking calculation is quite simply your Max bid x your Quality Score. For example £4.00 bid x 9/10 (4 x 9) gives a ranking of 36 and so on.

In this instance, the adverts would appear in the following order:-

Top Spot (36) Marketing with Ethics (of course)
2nd Place (24) Angie’s Ads
3rd Place (16) Mike’s Marketing
4th Place (12) Dave’s Digital

As you can see, having the highest bid alone is not enough. Ensuring you have a good mix of a competitive Max Bid, and a good Quality Score can give you far better positioning in the results.

How Much Will the Actual Cost Per Click Be?

Working out how much you ACTUALLY pay seems very complicated but it is, in fact, a very simple formula.

Google says you have to stay ahead of the person in the position below you and therefore calculates what you have to pay based on the ranking of the Ad directly below divided by your quality score and then adds $0.01. (in the example below we have set this at £0.01)

So the above businesses would pay as follows:

Again, this example shows that a great combination not only gives you better positioning, it can also cost you less that your competitors! Marketing with Ethics have achieved the top position and it only cost them £2.68, whereas Mike’s Marketing had the highest bid and was only placed 3rd but it cost him £6.01.

Ad Extensions Play An Important Role In Ad Ranking Too

In 2018 Google made a major change to how the ad ranking algorithm works by including Ad Extensions into the mix. Although they have not revealed exactly how this works in the calculation, they have said

The Ad Rank for your ads with extensions is adjusted for the expected impact of ad extensions and other ad formats by taking into account the relevance, click through rates, and prominence of your extensions. The more prominence your ad receives, the more impact ad extensions will have on your Ad Rank

Therefore, ensuring you have relevant ad extensions that attract additional clicks to your website can have a positive impact. For example. If you have an ad that is telling people to visit your shop, a Sitelink extension taking people to directions to your store will be very favourable. If on the other hand, you are encouraging people to call and have not included a Call extension, you could be penalised by Google.

As you can see, having a higher quality score and creating the best possible user experience with a well structured campaign, can save you a lot of money and position you much higher. On the down side,  throwing lots of money at a badly run campaign will only serve to eat your budget much more quickly.

How Do I Improve My Google Ad Ranking?

The simplest and most effective way to improve your Google Ad Ranking is to produce good quality, relevant ads that have a Quality Score of 7/10 or more (to find out your keyword quality score check out Tip 2 on Get Better Results With These Top Google Ads Tips blog). Then ensure that you have fully utilised the ad extensions available to you including Sitelink, Call, Call-Out extensions and image extensions (if relevant).

Finally, ensure that you are sending people to the right page in just ONE CLICK as this increases the user experience and ad relevancy. With these factors in place, your budget doesn’t have to be as high as your competitors. However, do bear in mind that there is still competition out there and you need to be willing to invest in your business to get the results. Don’t expect to achieve clicks for just pennies when you are in a highly competitive industry. Carrying out keyword research will give you a good indication of the bid level you want to set to achieve some great results.

Are you still struggling to get the best return on investment on your campaigns? If so, why not let us carry out a performance check on your current campaigns with a report of recommendations to get more for your money?

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This is Suzii, signing out for now. Have a great day everyone!