Making the Most of Adwords Ads – Here’s How Things Work

Making the Most of Adwords Ads – Here’s How Things Work

The best thing about a Pay Per Click (PPC) campaign is that you only pay when someone clicks on your ads. This reduces your cost and brings in targeted traffic to your website. 

PPC programs use several techniques to ensure that the person who clicked on your ad is actually interested in it. 

If they feel that the user wasn’t really interested in your product, the click will be regarded as invalid and then you don’t have to pay.

The most known pay per click (PPC) program is Google’s AdWords. I’m sure you’ve heard about it. But how does it work? 

This article will explain.

AdWords is based on a particular rating called Quality Score. Google determines your Quality Score (QS) by considering factors such as the quality and relevance of your landing page, keywords, and the click-through rate of your ad. 

Put simply; your Quality Score is a measure of the quality of your ad. If your ad, keywords, and the landing page accurately match what the person was searching for, they are more inclined to click on your ad. This will increase your Quality Score and you will pay less per click.


Google creates an AdWords auction every time someone types in a query into its search box. 

Every AdWords advertiser whose keywords match the search query can compete in this auction.

Each advertiser has an Ad Rank. This Ad Rank is determined by multiplying its Quality Score by the value of their bid. Ad Rank determines the order in which ads are displayed on a page.

The ad with the highest Ad Rank will get the top position, and the ad with the lowest Ad Rank will get the last spot on the page.

The actual amount that an advertiser pays is the lowest amount required to beat their nearest competitor in Ad Rank.

We have seen that Ad Rank is the product of Quality Score and Bid amount. Your bid is the highest amount you are willing to pay per click. This is not always the amount you pay.

The actual amount you pay per click = Ad Rank of the person below you/Your Quality Score + £0.01

Here is an example to illustrate

Consider this situation. Your QS on the keyword in a certain query/key phrase is 5. If the highest amount you are willing to pay for that click is £10, your Ad Rank is £50 (5 x 10).

Now if your competitor who has the same QS wants to beat you to the top spot, they have to beat your Ad Rank (50). So the actual amount they have to pay is

50/5+ £0.01 = £10.01

Now if their Quality Score is ten and your Quality Score is 5, they will pay much less than you.

Actual amount they have to pay = Ad rank to beat/their Quality Score + £0.01 = 50/10 +£0.01 = £5.01.

As you can see, the actual cost per click decreases if your QS is higher than that of your competitor. In this case, even if they bid £10, the exact amount they pay is £5.01 because the QS of their nearest competitor is much lower than theirs. 

Meaning, the person who wins the top position actually pays less than other advertisers below them.

That means you will control the auction if you have QS 10 keyword. Others who show up below you will be paying more than you if their QS is lower. And if an advertiser wants to show up above you, they have to outbid you. 

This will only increase their cost. Other advertisers who are paying much more than you for the top position will eventually back out of the auction.

This will further reduce the competition, and you will find yourself spending less and less for a click.