At its essence, Google Ads boils down to bidding on keywords and then paying that amount every time a user clicks on your ad—hence, pay-per-click (PPC).  

But a successful PPC strategy goes much deeper than that simple understanding. To maximize the value of Google Ads, it’s crucial that you fully understand how both the auction process and the ad ranking system function. 

This guide will pull back the curtain. 

How Does the Google Ad Auction Work? 

Google doesn’t automatically show ads for every search query. Rather, the algorithm must see that the searcher is intentionally looking for a good or product. When that does happen, an automated ad auction occurs for advertisers deemed eligible. 

So, how do you “win” the auction? 

There are a few factors that go into this equation, including:

  • Max CPC – This is your max bid, the most you’re willing to pay for an individual keyword or a group of related keywords. 
  • Relevance – The algorithm’s primary concern is helping users find the answer to their search query. So, naturally, it tries to identify the product or service that’s most relevant to the user’s expressed need. 

To determine relevance, Google gives a site a quality score of 1 (bad) to 10 (best). According to Search Engine Land, this is based on three factors: 

  1. Expected click-through rate (39% weight on total score)
  2. Ad relevance to the query (22% weight on total score)
  3. Landing page experience (39% weight on total score)

After running the auction and weighing these factors, the search engine will then resolve the ad positions and each advertiser’s CPC. 

What Is Ad Rank? 

Ad rank is not the same as quality score. In fact, quality score is one of the factors that go into the ad rank equation, which can be calculated as: 

  • Ad rank = QS x Max CPC 

This ad rank will decide the position in which a Google ad is displayed. The higher the ad rank, the higher up on the page they’ll be. Naturally, the highest scored ad will land the top position. 

But on-page priority isn’t the only consideration when it comes to ad rank. You must also factor in the impact it has on the cost to click since pricing is based partly on the competing bids. So, although there may be some variance, the typical CPC equation looks like this:

  • CPC = Ad rank of preceding advertiser/quality score + 1¢ 

PPC Marketing, NJ

Do you want to get the most out of your Google Ads? 

Knowing how the bidding and ranking work is just the start. A good start, no doubt. But there’s still much to learn. 

And our team can help with that. As PPC experts, Semgeeks understands that the bidding game isn’t won with a single strategy or technology. Rather, it’s about constantly adapting to trends and applying novel techniques to get ahead.  

Whether your brand needs guidance with Google Ads, paid social, or Amazon marketing, we know what it takes to build and then deliver on a winning PPC campaign. 


Search Engine Land. PPC Guide: How the Auction Works.