Google’s Cost Per Click Equation

RealTimePlease · 10-21-2010, 03:50 PM

Found this and thought you would appreciate it.

Google’s Cost Per Click Equation
The driving principle behind Google’s Cost Per Click equation is this: You will always pay the lowest amount for the highest position you can get. In other words Google Adwords is charging you the minimum amount for you to maintain the position you achieved from your AdRank score. AdRank is a numeric value you get by multiplying your Quality Score by your bid. Your Quality Score is a general measure of your relevance to the keyword in question (New to AdRank or Quality Score? Check out my earlier post). Your cost per click is calculated by dividing the AdRank of the ad beneath yours by your Quality Score and rounding up to the nearest cent.

Actual CPC = (Ad Rank to beat ÷ Your Quality Score) + $0.01

Example
That sounds complicated so go over an example that will make it more clear. Let’s say that Jeff and Tom are both eligible to show ads for the same search term.

Jeff has set a maximum cost per click of $3 and he has a quality score of 5. His AdRank is then Max CPC times Quality Score which is 3 x 5=15.

Tom’s keyword has a maximum bid of $2, a dollar lower than Jeff’s. However, he’s got a Quality Score of 9, giving him the higher AdRank of 18.

Because Tom has the higher AdRank than Jeff, he wins the better ad position. How much does he pay? Lets consult the equation above. Google Adwords takes the ad-rank below him (Jeff’s 15) and divides by his own quality score (9). Then, add one cent. Jeff pays 15/9 + 0.01 = $1.68 (which is lower than his maximum bid of $2).

Exceptions
If your ad is the only ad showing, a click costs the lowest price possible to show. This depends on the matched keyword’s Quality Score – the higher the score, the less you pay.

If your ad appears above the search results, click cost is determined in the same way as an ad on the side of the page, but the keyword bid and Quality Score must meet certain thresholds.

paulgl · 10-21-2010, 05:40 PM

You've explained in detail what I keep saying.

Get click thrus. Be spot on. Improve your QS.
Google rewards you with a lower cost for being on top.

If only adsense people would realize this before complaining
about lack of top dollar for a click....

But never, never, never, be afraid of bidding high...
And sometimes you can't beat the big boys because $$$$ talks.

Paul

RealTimePlease · 10-22-2010, 02:07 AM

Yes - here you have it... Paulgl we have know this for looooooong ;-)

bestitrix · 10-22-2010, 02:18 AM

I have no idea that Quality Score of a websites is a big factor when implementing Adword. I will do a little reading on it and find out how to improve my websites Quality Score. Thanks for sharing.

RealTimePlease · 10-22-2010, 02:51 AM

There is a button for that.

Quote:

Originally Posted by bestitrix

Thanks for sharing.

10-21-2010, 03:50 PM	#1
RealTimePlease Active Warrior War Room Member Join Date: Oct 2010 Location: , location, location Posts: 73 Thanks: 28 Thanked 67 Times in 13 Posts	Google’s Cost Per Click Equation Found this and thought you would appreciate it. Google’s Cost Per Click Equation The driving principle behind Google’s Cost Per Click equation is this: You will always pay the lowest amount for the highest position you can get. In other words Google Adwords is charging you the minimum amount for you to maintain the position you achieved from your AdRank score. AdRank is a numeric value you get by multiplying your Quality Score by your bid. Your Quality Score is a general measure of your relevance to the keyword in question (New to AdRank or Quality Score? Check out my earlier post). Your cost per click is calculated by dividing the AdRank of the ad beneath yours by your Quality Score and rounding up to the nearest cent. Actual CPC = (Ad Rank to beat ÷ Your Quality Score) + $0.01 Example That sounds complicated so go over an example that will make it more clear. Let’s say that Jeff and Tom are both eligible to show ads for the same search term. Jeff has set a maximum cost per click of $3 and he has a quality score of 5. His AdRank is then Max CPC times Quality Score which is 3 x 5=15. Tom’s keyword has a maximum bid of $2, a dollar lower than Jeff’s. However, he’s got a Quality Score of 9, giving him the higher AdRank of 18. Because Tom has the higher AdRank than Jeff, he wins the better ad position. How much does he pay? Lets consult the equation above. Google Adwords takes the ad-rank below him (Jeff’s 15) and divides by his own quality score (9). Then, add one cent. Jeff pays 15/9 + 0.01 = $1.68 (which is lower than his maximum bid of $2). Exceptions If your ad is the only ad showing, a click costs the lowest price possible to show. This depends on the matched keyword’s Quality Score – the higher the score, the less you pay. If your ad appears above the search results, click cost is determined in the same way as an ad on the side of the page, but the keyword bid and Quality Score must meet certain thresholds.

10-21-2010, 05:40 PM	#2
paulgl Plundering the Web War Room Member Join Date: Feb 2007 Location: , , . Posts: 4,849 Thanks: 804 Thanked 1,199 Times in 886 Posts	Re: Google’s Cost Per Click Equation You've explained in detail what I keep saying. Get click thrus. Be spot on. Improve your QS. Google rewards you with a lower cost for being on top. If only adsense people would realize this before complaining about lack of top dollar for a click.... But never, never, never, be afraid of bidding high... And sometimes you can't beat the big boys because $$$$ talks. Paul
	How to Make Money off Facebook: Login to your account. Deactivate your account. Get your butt to work.

10-22-2010, 02:07 AM	#3
RealTimePlease Active Warrior War Room Member Join Date: Oct 2010 Location: , location, location Posts: 73 Thanks: 28 Thanked 67 Times in 13 Posts	Re: Google’s Cost Per Click Equation Yes - here you have it... Paulgl we have know this for looooooong ;-)

10-22-2010, 02:18 AM	#4
bestitrix HyperActive Warrior Join Date: Oct 2010 Location: Above the equator Posts: 101 Thanks: 4 Thanked 5 Times in 5 Posts	Re: Google’s Cost Per Click Equation I have no idea that Quality Score of a websites is a big factor when implementing Adword. I will do a little reading on it and find out how to improve my websites Quality Score. Thanks for sharing.
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