Google AdWords

Chapter 2. Understanding the Auction

How the AdWords Auction Works

Before discussing account optimization, it’s helpful to understand how AdWords works. AdWords is an auction, conducted in real-time every time a person completes a search. Auction winners have their ads displayed on the top and right side of the Google search results page. The highest-placing winners achieve more prominent ad positions on the page, relative to other advertisers.

The auction calculations happen in milliseconds; searchers have no idea that AdWords has sorted through millions of keywords to determine which ads appear on the page. Here’s how it works:

When someone searches on Google, AdWords compares the search query to every keyword in advertisers’ accounts, identifying keywords that match or are closely related to the query. Each match represents an entry in the auction and an advertiser who wants to display an ad on the search results page.

AdWords then generates a real-time Quality Score for each keyword to determine which have sufficient quality to participate in the auction. The algorithm considers many factors, including the keyword’s clickthrough rate, the relevancy of the ad text and search query, and the quality of the landing page. If the keyword’s Quality Score is too low, AdWords will not display the ad, no matter how much the advertiser is willing to pay.

Once AdWords identifies keywords with passable Quality Scores, the auction resumes. Now, AdWords calculates Quality Score a second time. This ...