- [Instructor] I'm here on the Google search page,
and I've ran a query for best meal delivery,
and we can see there are four ads here
at the top of the page, and if I scroll
to the bottom, we see a couple of ads here
at the bottom as well.
Now the key question is, how does Google decide
the order that these appear in?
Now fundamentally, Google Ads is an auction-based platform,
and by that logic,
you'd expect that the highest bid should appear
at the top of the page
or in what we call position number one.
So, here we have ads in position one,
two, three and four.
So, let's talk this through.
If we have four people bidding,
and the max bids per click for each are $5,
$4, $3, and $2, you might expect
that bidder number one at $5 would get the best position.
That's not the case, the winner is actually determined
by what we call adware.
Now, I'm going to simplify quite a bit,
but the score is essentially calculated
by looking at the maximum bid
and multiplying it against your ad quality score.
And your ad quality score is based
on a variety of factors.
The first is your expected click-through rate.
Google is going to make an educated guess
on how often people are going to click your advertisement.
From there, we have your landing page experience.
Your advertisement is only useful
if your visitors can find
what they expect once they click over
to your site.
Your landing page must be incredibly relevant
to the ad, easy to navigate, and transparent
on how you're collecting and using your customer data.
Now they'll also determine your ad relevance
by analyzing the language in your ad
as it relates to what a user is typing into Google.
And this really prevents people from simply buying their way
into unrelated keywords.
Google also has extensions that you can add
onto those ad units.
For example, you might add a phone number
or include recent reviews from customers.
Leveraging these extensions will increase your quality.
So, Google takes all of these factors
and calculates a quality score,
and that score will be based on a scale of one to 10.
Now we don't know for certain how Google
will calculate your final ad rank,
but for the sake of this example,
let's just assume
that they take your maximum cost per click bid
and multiply it by your quality score.
So let's say that we have four advertisers bidding.
We have orange brand, green brand,
yellow brand, and blue brand.
Let's assign them each maximum bids
of $5, $4, $3, and $2, and then, let's assign
the quality score as if Google provided it.
We'll set that to two, six, nine, and seven.
So we can run our simple formula
and multiply these numbers together
to achieve our ad rank of 10, 24, 27, and 14.
So ad position number one will go to yellow brand
even though they had a lower bid.
Ad position number two will go to green brand,
even though they had a higher maximum bid.
And if your rank is just too low,
well then you cannot appear at all.
So in our example, even the highest bidder likely won't
be displaying their advertisement.
The orange brand has such a low ad rank,
they may not even appear.
Now it does get a little bit more complicated.
Google uses a variation
of what's called a second price option.
So you're only paying just one penny more
to beat the advertiser with the next highest ad rank.
This means that your bids will automatically
be adjusted for you.
And Google's doing this to encourage you
to bid your true highest amount knowing
that they'll always correct the bids to be in your favor.
And that's roughly how Google manages its auctions.