Depending on the PPC product that we are working with the auction can work in a number of different ways – however most commonly when we refer to the PPC auction we are talking about Text Ad Advertising which is the advertising that appears at the top (& bottom) of Google’s search results.
The Text Ad Auction works on an equation of Maximum CPC (Cost-Per-Click) * Ad Rank to determine a position within the search results. The benefit of having the Ad Rank metric is that Google doesn’t just look to award the top position to the advertiser who pays the most – rather there is a key focus on the quality of the advert.
The Ad Rank Metric is made up of a Quality Score – which comprises different elements including Expected CTR, Landing Page Experience & Ad Relevance – each of which are designed to improve the quality of the ads & are essential to ensure that you get good ad positioning. By improving the quality of your ad you can bring down your Max CPC – leading to still having a good position, but also spending less!
It’s worth noting that Google Shopping works in a slightly different way – working with a Search Impression Share – so the higher the bid the more available impressions & search space you will be able to gain.