AdWords Auction Insights

The Largest Ad Auction is the World

Where the Highest Bidder Can Lose!

Google AdWords auction insights and why the highest bidder doesn’t always win.

Did you know that in one of the largest auctions in the world, the highest bidder doesn’t always win? This auction is the Google AdWords auction where advertisers bid for position in the paid search results. Google AdWords is what is referred to as a PPC (Pay Per Click) search advertising program.

Having valuable AdWords auction insights can help lower your cost per click while enhancing your ad position in the paid search results.

AdRank is a value that’s calculated by the Google Ad system. AdRank is used in with maximum bid amount (willingness to pay) by Google to determine where ads are shown on a Google search results page or if your ads will even be shown at all. The winners end up on page one at the top of the search results page. The losers end up invisible to Google searchers, not being displayed in the search results.

Insights into the Google AdWords Auction System

In the video below, Chief Economist at Google, Hal Varian provides valuable AdWords auction insights.

Why is it That the Highest Bidder Doesn’t Always Win?

According to Hal, the Google AdWords auction system is designed to deliver consumers the most relevant ads while delivering the most interested audiences to advertisers. Sounds like a win-win, right?

Hal indicates that the motivation for Google to design the AdWords Ecosystem this way is a focus on the best user experiences while providing optimal outcomes for advertisers. This results in more people using Google, and by extension, more revenue for Google.

AdRank Components

Hal also provides insights into the key components of Ad Rank:

Bid amount, which is your maximum willingness to pay for a click when a searcher clicks on your ad,
Quality score based on ad relevancy, estimated probability that someone will click an ad and the landing page quality,
Site Extensions based on eligibility and use of formats.

Hal concludes with some concrete examples on how the Ad Rank factors work together to determine your ad’s position and cost.

What’s Changed About Ad Rank (Or at Least the Way it is Covered by Hal)

The current Ad Rank formula now includes “Format Impact” as an ad ranking factor. This was announced by Google back in October 2013 but the video above is the first time Hal, a staple in educational Google AdWords/Ad Rank videos online, provides guidance on ways advertisers can raise their AdRank through formats/extension to move up in the paid search results while lowing cost per click.

The Google AdWords Landscape

So what does the AdWords “landscape” actually look like. The following infographic produced by Moz provides and overview of the PPC Landscape in 2013 based on paid search result tests they conducted. The Moz test set includes 10,000 queries ran by a specially designed crawler during normal business hours. The graphic below illustrates the findings from those tests.

Clearly, as one can see from the paid search dataset, there is a large amount of space of first page of the Google search results dedicated to paid advertising, especially in the more competitive industries like apparel, real estate and home & garden.

Today, more than ever, getting on the first page of Google is the key to getting found online. Alternatively, ask any search marketer and they will tell you that page 2 of the Google search results is the best place to hide a dead body! Be sure to apply to AdWord auction insights shared by Hal to benefit your own search marketing campaigns