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Understand the AdWords Algorithm

Author: AK Digihub
by AK Digihub
Posted: Apr 18, 2019
quality score

Previously I have already discussed with the concept of PPC Advertising with Google AdWords.

Today we will look at how Google decides the Ad Position by understanding the AdWords algorithm

Understand the AdWords Algorithm

I’m sure you all aware of Google Adwords and Have been using it for a while but there are some basics which need to know to understand the AdWords Algorithm.

Yes to succeed in marketing campaign you need to understand the Adwords Algorithm.

what is the AdWords Algorithm?

Google’s AdWords algorithmic may be a mathematical calculation that uses a range of various factors to ultimately confirm your ad position.

It’s a worth that’s employed by Google to work out precisely wherever your ads are shown on a specific page and, in several cases, whether or not your ads can seem ahead of your audience in the slightest degree.

So Google will decide your ad positions?

What is Quality Score?

The Quality Score is the key to running Google AdWords. The Quality Score is typically the relationship between ad group, keywords, ad and landing page and what a person is looking for and the likelihood that someone will click on the ad. Here’s the Google page for "Quality Score, Review and Understand."

Each search on Google will create an AdWords auction. Any advertiser whose keyword matches the search query will participate in the auction.

What is Clickthrough Rate?

Clickthrough rate is an important measure to better understand the results of online marketing campaigns.

The CTR helps us to better understand the number of visitors to our websites online as a result of a campaign.

We will see how to calculate the clickthrough rate with an easy-to-understand formula.

To Calculate CTR We Divide the number of clicks through to the site divided by the number of total impressions. Then we multiply it by 100.

For Example: if your Ad has 1000 impression and 20 clicks then your Ad will have CTR of 1%

CTR 2% =20/1000×100

Why CTR is Important?

CTR is an important parameter for ad analytics because it gives you an idea of how your keywords and ads performing.

You can check your CTR at any time in your AdWords account. A high CTR means users find your ads useful and relevant.

Let’s Say Sahil wants to buy fresh flowers for his girlfriend for Valentine’s Day, he is typing in "fresh flowers" he’s seeing two ads the first ads says fresh flowers buy locally and the second ad says red roses buy online. Although these two ads are relevant, Sahil is more likely to click on the one containing your original search term for "fresh flowers."

Why should you be interested in CTR?

The percentage of clicks is important as it directly affects the quality score. Google is interested in the overall user experience and rewards advertisers with the most relevant ads.

A high CTR means a higher quality score, which means higher ad placement and lower cost-per-click. So what is the right CTR?

In general, you must aim for at least 2%. However, a good CTR is different for each keyword.

In your account, Google gives estimates as to whether your CTRs are good, bad, or average, so you can monitor them closely.

How does AdWords rank ads?

Ads are sorted by ranking. The highest Ad Rank wins first place, and so on, until the last bid that is valid for the auction or the last position on the page.

Ad Rank = Quality Score * Bid

What the advertiser actually pays is the lowest amount needed to outperform the competitors below him.

How, much each advertiser competes because of its rankings Again a slightly simplified version.

This is called an "AdWords Discounter" and there are few questions related to this on each certification exam are intended to understand the following.

In many ways, understanding this information is the key to completely unlocking AdWords.

$ = Quality Score + $0.01.

Understanding AdWords Algorithm (Adrank) in detail with examples

Let’s put this into practice using real-life examples, and I’ll show what I mean by the importance of Quality Score (QS).

Goa+beach+house +for +sale has a QS = 8

Let’s say we want to be first on the page, no matter what. We cannot guarantee that, but we can certainly be pretty sure if we go beyond the keyword and say $80.

Ad Rank = 640= (QS 8 * $80 Bid)

To win, a competitor must have an Ad Rank> 640. This means that even with a QS 8 keyword, he has to bid $ 80.01 per click to get the first place.

Assuming that you have a more realistic offer of $10/ click, the amount we would pay at the auction will be calculated as follows.

Ad Rank to beat = 80 = (QS 8 * $10 Bid)

$10.01 = 80 / 8 + $0.01 = (80 Ad Rank to beat / our QS 8 + $0.01)

So even though we bid $80, we only pay $10.

If our Quality Score on that keyword in that auction was 8, then the amount we would pay is:

$9.98.00 = 80 / 8+ $0.01 = (80 Ad Rank to beat / our QS 8 + $0.01)

It’s going to be really interesting here. The person in the first place could pay less than the people among them.

Sounds Crazy? This is the reason why this happens. Assuming the same $ 80bid for first place, let’s say that the next participant has only a 4 QS keyword for a $ 10 bid, and next person has QS 6 in a $ 6 bid and the person in position 4 has the keyword QS 7 in a 9 dollar bid.

Position 1:

Ad Rank

40 = (QS 4 * $10 Bid)

$4.99 = 40 / 8 + $0.01 (40 Ad Rank to beat our QS 8 + $0.01)

Position 2:

Ad Rank to beat = 36 = (QS 6 * $6 Bid)

$8.97 = 36 / 4 + $0.01 (36 Ad Rank to beat / #2 QS 4 + $0.01)

Position 3:

Ad Rank to beat = 63 = (QS 7 * $9 Bid)

$6.99 = 63 / 9 + $0.01 (63 Ad Rank to beat / #3 QS 7 + $0.01)

In this example, our keyword QS 8 in position 1 reports less than positions 2 and 3.

This calculation applies regardless of the position displayed so that the person in position 3 can pay less than position 4 immediately

If you have a keyword of quality 10, you control the bid.

With a Quality 10 keyword, you know that not only will you pay the least amount for the work you do, but you’ll have to ALL over you be forced to pay the PLUS.

They cannot defeat you unless you defeat them.

In the past, we used this to force a competitor to leave a keyword, especially if he bought a branded keyword that we knew was the highest quality level (and conversion rate).

It’s great fun to stay in position 2 and slowly increase the quotes with a QS10 keyword, as the automated systems at the other end only increase the bids and costs for the competitor.

In the meantime, we have paid only the minimum amount that should be displayed in the auction as there was no other competitor. You do not pay ten times more than you do per click.


I used to think that almost all professional PPC managers understood this concept, but as I know and work with a growing number of them, less than 5% of them seem to really understand what’s going on under the hood. I would probably say less than 1%.

It is a process of constant learning., In General AdWords in one such topic where you will get to know with new terms every now then.

Google is constantly introducing new updates to improve the user experience and give advertisers a simple approach.

I always follow neil patel for tips related to Google Adwords and always hunt for new things surfing on the web.

If you have suggestions or query about Google ads, please let me know in the comments section.

Source: Understand the AdWords Algorithm | Akdigihub

About the Author

AK Digi Hub(Arishna Digital Communication Pvt. Ltd) is the blog where you get Latest updates related to Digital Marketing. Inspired to Work and give the best possible solutions.

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Author: AK Digihub

AK Digihub

Member since: Feb 01, 2019
Published articles: 80

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