How does Google Ads determine your cost per click?

June 21, 2022By milenah

Photo by Firmbee.com On Pexels License CC0

The fantastic part about Google Ads is that while it works like an auction, the winners aren’t selected based upon quote alone, and you do not necessarily pay your optimum quote.

How is this possible? Let’s take a quick rundown of how Google Ads identifies the winners and what they pay per click.

Action # 1: Quality Score

When someone searches on Google, Google looks to see if any advertisers are bidding on keywords appropriate to that inquiry. If yes, an auction is triggered and Google gets in all pertinent ads into the auction.

Its initial step in picking a winner is to appoint each advertisement a Quality Score. This is a number from 1-10 determined by the advertisement and landing page’s significance to the keyword, expected click-through rate (which includes your historical efficiency), and landing page experience.

Step # 2: Advertisement Rank

Google will then compute each competing ad’s Ad Rank, which determines if and where your ad will be placed in the paid outcomes area. Ad Rank is your Quality Score multiplied by your maximum quote (the most you’re prepared to pay per click on your advertisement).

Action # 3: Cost per click

If your ad gets revealed, you only pay if someone clicks on it. However as mentioned above, you do not necessarily pay your maximum quote. The Google Ads cost per click formula is the Advertisement Rank of the ad below yours divided by your Quality Score, plus one cent.

With this formula, an advertiser can pay less per click than another advertiser in the SERP and still be in a greater position due to a much better Quality Score.

This is why marketers with a small budget can take on huge spenders on Google.

Additional variables in your Google Ads expenses

There are several other variables that affect your Ad Rank– and ultimately, your advertisement investment– but the optimal bid and Quality Score are the crucial ones to know. Here are some (but definitely not all) of the additional aspects that influence your costs.