Search engine advertising works on a cost per click (CPC) basis, meaning that the advertiser only incurs costs when a user clicks on an ad and is redirected to the landing page. Advertisers can determine the cost of each click, but the frequency of ad placement depends on the scope of the offer. The allocation of the advertising space is then decided by an auction, also known as real time bidding.
What is Real Time Bidding?
For each search query entered, the search engine checks the terms to determine which ads are relevant and helpful to the user.
If the search term contains a frequently occurring keyword, there are often several potentially matching ads that are evaluated for relevance in a split second. An important criterion in the selection of the ad in this case is the CPC bid of the advertiser, but the quality of the ad must also be taken into account in order to create the most helpful selection of results for the user. A particularly highly ranked ad is more likely to be displayed in the most prominent positions in a relevant search. Since the high-ranking ads are determined by their CPCs and quality scores, the value of the ad can be determined using the following equation:
Top placed ads = highest CPC bid x quality score
With CPC bids, advertisers set the maximum price they are willing to pay for a click on their ad. The higher the bid, the more likely it is that the ad will occupy a prominent position in the search results. In return, the Google advertising platform grants its advertisers a high degree of transparency and up-to-date information on rates in search engine advertising. Fixed monthly and daily budgets allow the advertiser to determine exactly how much money to spend on SEA campaigns each day. Google keeps the ad in the search results until the budget for the day is used up. For example, a $3,000 monthly budget can be broken down into $100 per day, but how many ads appear in search results depends on the cost per click. The cost per click depends on consumer demand and can vary from a few cents to several dollars.
The quality rating of Google
Google has introduced a quality score as part of its rating system to prevent low-quality ads with high bids from landing at the top of search results. This is based on the requirements of the users and takes their online behavior into account. A well-designed SEA campaign with quality content will rank significantly higher in search engines because it is helpful and inviting to the user. It follows that a high CPC bid is not the only factor in creating a successful ad. Google’s quality score rates the following factors as essential to an effective advertising campaign:
Expected click-through rate: This is based on how often the ad is placed (impression) and how many clicks an ad achieves. Ads that have a high click-through rate are considered more relevant.
Landing page quality: If a user arrives at a link target via an ad that has been awarded for its relevance, transparency and user-friendliness, the ranking improves.
Relevance of the ad text: Ads that appear in the top positions have titles and texts that perfectly match the search query. The more relevant the ad text, the better the placement.