The wonderful thing about Google Ads is that even while it functions as an auction, the winners aren't decided only on the basis of bid, and you don't always have to spend your maximum bid. How is that even possible? Let's quickly go through how Google Ads chooses the winners and how much each click costs.
Step #1: Quality Score
Google checks to see if any advertisers are placing bids on keywords related to a user's search when they conduct one. If the answer is yes, Google places all pertinent ads in the auction. Each advertisement is given a Quality Score as the first step in selecting the winner. This score ranges from 1 to 10, depending on the keyword relevancy of the ad and landing page, anticipated click-through rate (which takes into account past performance), and landing page experience.
Step #2: Ad Rank
The Ad Rank of each competing ad is then calculated by Google, determining if and where your ad will appear in the paid results area. The highest bid, or the amount you're willing to spend per click on your ad, multiplied by your Quality Score determines your Ad Rank.
The commercials that have the highest Ad Rank scores are displayed.
Step #3: Cost per click
You only pay if someone clicks on your advertisement if it is visible. However, as was already said, you don't always place your highest bid. The formula for Google Ads cost per click is your Quality Score multiplied by the Ad Rank of the ad that is immediately behind you, plus one penny.
By using this formula, an advertiser in the SERP can pay less per click than another advertiser and still rank higher because of a greater Quality Score. Because of this, small-budget advertisers on Google can compete with those who have large budgets.
Additional variables in your Google Ads costs
Although there are additional factors to consider that may affect your Ad Rank and, eventually, your ad expenditure, the maximum bid and Quality Score are the most crucial ones. Here are a few other variables that affect your costs (but by no means all of them).
- Relevance and experience with landing pages
- Superiority at auction
- The search context, location, and device of users
- Other forms of bidding
- Various ad formats
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