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Adwords Bidding

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# 1
Visitor ✭ ✭ ✭

I am trying to understand how the bidding works. CPC, minimum bid and maximum bid - these terms are confusing me.  I liked how this site: http://www.positionconcepts.com/Search-Engine-Marketing-Research-Analysis-Articles/google-adwords-al... showed a table with the CTR * Max Bid formula result to show how the ads get ranked.

 

Now, I am trying to grasp the Max Bid part. If I set my CPC to $0.50, will Google always bid the entire $0.50 everytime my ad is relevant enough to compete with other ads? Or will Google only bid the minimum out of the $0.50 it wil take to push my ad onto the page? If my ad is the only relevant ad, will Google still bid part (or all) of $0.50? 

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Accepted by topic author septerr
September 2015

Re: Adwords Bidding

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# 2
Participant ✭ ✭ ✭

Max bid means you will never be charged more than your max bid for a click on your ad. Most often you will actually be paying less, due to the clever auction model Google has created.

Yes, Google will always use your max bid when calculating your AdRank.

If you are the only bidder in an auction - the only ad eligible to show up - you may still have to pay your max bid or close to it, depending on your quality score.

 

The formula for AdRank = max bid X quality score.

 

Bud the formula for actual price per click is: AdRank of nearest advertiser below you / Quality Score of your ad + 1 cent

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Accepted by rashu (Google Employee)
September 2015

Re: Adwords Bidding

Follower ✭ ✭ ☆
# 3
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Hi,

 

I think David_Precisera, answered most of your questions.

 

Reg. your question about your ad being the only one selected by Google, Google won't charge a minimum or full $0.50.  Again here Ad Rank would be calculated based on your quality score and Max CPC.  If your QS is high then the actual CPC would go down but if you have a low QS you would be charged much higher.  

 

Even if nobody is advertising on a keyword, Google doesn't guarantee you ad placement.  It all depends on your QS and then Max CPC.

 

Hope this helps.

 

Nimesh.

View solution in original post

Marked as Best Answer.
Solution
Accepted by topic author septerr
September 2015

Re: Adwords Bidding

Participant ✭ ✭ ✭
# 2
Participant ✭ ✭ ✭

Max bid means you will never be charged more than your max bid for a click on your ad. Most often you will actually be paying less, due to the clever auction model Google has created.

Yes, Google will always use your max bid when calculating your AdRank.

If you are the only bidder in an auction - the only ad eligible to show up - you may still have to pay your max bid or close to it, depending on your quality score.

 

The formula for AdRank = max bid X quality score.

 

Bud the formula for actual price per click is: AdRank of nearest advertiser below you / Quality Score of your ad + 1 cent

Marked as Best Answer.
Solution
Accepted by rashu (Google Employee)
September 2015

Re: Adwords Bidding

Follower ✭ ✭ ☆
# 3
Follower ✭ ✭ ☆

Hi,

 

I think David_Precisera, answered most of your questions.

 

Reg. your question about your ad being the only one selected by Google, Google won't charge a minimum or full $0.50.  Again here Ad Rank would be calculated based on your quality score and Max CPC.  If your QS is high then the actual CPC would go down but if you have a low QS you would be charged much higher.  

 

Even if nobody is advertising on a keyword, Google doesn't guarantee you ad placement.  It all depends on your QS and then Max CPC.

 

Hope this helps.

 

Nimesh.

Re: Adwords Bidding

Badged Google Partner
# 4
Badged Google Partner

The article is right on, sort of...

 

It's not CTR per-se that the calcualtion is based on. It's as David stated "The formula for AdRank = max bid X quality score."

Yes, CTR is a large factor of QS, so in theory you could extrapolate a CTR based adrank model. Maybe...

 

I get confused with all the math, but to me, the actual CPC calculation model is not as important as the Value calculation of the advertising. Is it worth it to raise your bids to win a high enough adrank to show an ad in the top position? If you had a QS of 10 for every KW, would it be profitable to advertise that KW, no matter how good a deal you are getting on the actual CPC? Do any of those clicks actually generate any profit? That's the only part of the article I have absolutely no disagreement with! Smiley Happy

Tom