How Adwords auction works?

Lorna Rose Gill Posted by Lorna Rose Gill

Google’s Chief Economist Hal Varian in his video best explained the process of how adwords auction works and in to what extent it is related to an advertiser’s price paid for the ad. He elaborates the process and shows adwords auction dependencies on  Adrank, Quality Score,  cost-per-click (CPC) and how are these variables rank in terms of their importance and relevance. Whether you are a beginner or a pro his video explanation is always a good reference point to clear out all ambiguities.



Our friends at Wordstream published this brilliant infograph which is a noob’s guide to adwords auction process, key elements that determine the price paid for a click and the components that make up the quality score.

What is Google AdWords? [ infographic ]



In rudimentary terms adwords auction process can be defined as  “a process structured so that all bidders can win; an awards bidder need only pay the minimum amount required to beat out the person below them”. While running an adwords campaign your ad will appear on the top or the right side of the SERP. The rank or ad position of your advert on these positions is proportional to the traffic of your website while the traffic of the website is related to the following variables.

Quality Score – Rating that search engines assign to each keyword chosen by an advertiser
Click Through Rate (or CTR) – Percentage which expresses how many people are seeing your ad and then clicking it
Bid Price – the price per keyword an advertiser is willing to spend to gain a click
Ad Relevance – Relevance of the text in an ad in relation to keyword

Along with these variables it is important that the landing page to which the advert is pointing is highly related to the advert running. The content of landing page has keywords matching to the keywords in the ads. The relevancy of landing page is an important determinant of quality score which affects the price paid for a click or impression.

Every single step involved in auction process builds grounds for the next step to follow until the completion. I will be doing detailed posts on all of these factors in the coming weeks.

Have we missed any step or any point that you think have been helping your campaigns? Share your techniques with us.

About the author

Lorna Rose Gill
Lorna Rose Gill
Lorna is responsible for acquisition marketing at Adthena, communicating their award-winning product and generating demand. She has developed her career in fast-paced, start-up environments, including two tech track 100 companies. She is curious and passionate and likes to find stories in data and technology.