How Does the Display Auction Work

A key to improving your AdWords performance lies in understanding how the AdWords Auction process works. Many AdWords advertisers may wonder “How does the display auction work?”

At its, core AdWords is auction based. Auctions are used to determine not only which ads will appear to which users, but the order those ads are shown and how much they will cost. In this way, the display network ad auction and the AdWords SEM auction are relatively similar.

THE ADWORDS DISPLAY AUCTION

HOW IS QUALITY SCORE DETERMINED?

Quality score is rated between one and ten with one being the lowest and ten being the best quality. It’s essentially a determination of how relevant your ad and landing page experience are to the searcher’s query.

How_is_Quality_Score_Determined

HOW IS ADRANK DETERMINED?

The factors that determine Adrank include your quality score times the AdWords auction bid or your max CPC (the highest amount you’re willing to pay for someone to click on your ad.)

MAX CPC VS. ACTUAL COST PER CLICK

It’s important to note your maximum CPC bid isn’t necessarily the amount of money you’ll be paying. Your actual cost-per-click will depend on the outcome of the auction. In fact, you will often end up paying less than your maximum CPC bid because you are only paying what is required to rank higher than the position immediately following yours.

For instance, if your maximum bid is $1.01 and other advertisers in the auction bid .99 you’ll only end up paying a $1.00 not your max bid.

HOW IS THE DISPLAY AUCTION DIFFERENT FROM THE SEARCH AUCTION?

For the AdWords display auction, several important factors impact the ultimate price you pay. Much of this is based on your current position – you will only have to pay for incremental clicks from being in your current position to rank higher than the “next best” position.

Likewise, you’ll pay the price you would have for the next best position for the entirety of the remaining clicks you receive. It’s very similar to an income tax bracket that way – just because you’re in a 25 percent bracket doesn’t mean you’re paying 25 percent on every dollar you earn.
You may be required to pay additional service fees for ads that use other features like audience targeting, for example. In this case, your maximum bid is reduced, and the fee for audience targeting is added on top of the closing auction price.

HOW TO BID ON THE DISPLAY AUCTION

You can bid on display network campaigns in a few different ways, including:

  • Ad Group Default Bids
    • Sets the maximum bid you’d like to pay for any keyword or placement that does not have an otherwise specified set bid.
  • Custom Bids
  • Bid Adjustments
    • Bid Adjustments are a good way to maintain a better level of control over where your ad appears. At the campaign level, you can determine targeting methods in ad groups such as locations, times, days and even whether or not they appear on mobile devices.

If you’ve got questions about Google display advertising, or PPC marketing don’t hesitate to reach out to the team at Evolve Digital Labs. We’re happy to assist you in optimizing Google display and overall campaign performance.

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