What is Pay Per Click Marketing:
PPC or Pay Per Click is a search engine marketing where you choose keywords, create ads and then bid on keywords or phrases you want to show your ads for.
Your ad appears above and below organic search results.
Every time user types a keyword in Google, search auction happens instantly and advertisers get the position based on their quality score and bidding amount.
You get charged every time someone clicks your ad which will never be higher than the bidding amount.
What is CPC?
Cost Per Click is the amount you pay for each Ad click you get from Google. Your CPC depends on your Quality score & maximum bid amount you are willing to pay for each click. Your CPC can be lower but never be higher than your maximum bid.
Actual Cost Per Click (CPC):
Actual CPC = Ad Rank of next highest competitor/ Your Quality Score
Higher is the Ad rank, better is the Ad Spot. Ad rank is calculated by multiplying your Maximum bid with the Quality Score.
(Maximum Bid * Quality Score) = Ad rank
When you are the only bidder or the lowest bid in the AdWords auction, then you will be charged maximum bid per click.
In any situation, your CPC will never be higher than your maximum bid.
For example: if you set up the bid for the keyword “Digital Marketing” to $2 then you won’t pay more than $ 2 for each click. In other words, this is the maximum amount you are willing to pay for each click.
However, your Ad positions may be lower in position or won’t show much based on your quality score. In this case, Google AdWords will suggest you raise your bid.
In simple words, advertisers with high-quality score get higher Ad rank and Lower CPC.
Advertisers who are bidding heavily on low quality score gets penalized by AdWords.
How many times does a Google auction run?
The auction runs billions of times each month. The results are displayed as per the user’s query which shows them relevant ads. This way advertisers connect with their potential customers and Google make ton lot of money.
How does AdWords Bidding Work?
The actual position of your ad is determined by Ad rank which means if you get high ad rank you will get the top position. Ad rank is calculated as
(Maximum Bid * Quality Score) = Ad rank
Quality score:
Now, Let’s talk about the quality score:
We already know the importance of Quality Score in Google AdWords. This is because Google cares a lot about relevancy & wants to provide its users the best relevant results for their search queries.
In order to achieve good quality score:
- Segment your products/ services in different Ad groups
- Use no more than 20 keywords per Ad group
- Keep your Keywords of one theme in 1 Ad group
- Use Negative Keywords
- Use Ad Extensions
If you keep your Quality score high Google will benefit you with lower CPC. And lower Cost Per Click means great Return On Your Investment (ROI).
How does the Google auction work?
When a user searches for a query, Google instantly processes the request & runs the auction in order to determine the Ad Positions and CPC of each advertiser.
Every time the Keywords you are bidding on matches the search query, your Google Ads enters into an auction.
Actual CPC:
Your Actual CPC is calculated by dividing the ad rank of the competitor below you by quality score plus $0.01.
Conclusion:
In order to run profitable AdWords campaign, make sure to keep your Quality score high. Remember, Higher is the Quality score, lesser you will pay.
