Formula to Calculate Google Adwords Ad Rank and Actual CPC

Posted by on April 19, 2010 · Filed Under PPC 
TweetAs a search engine marketing professionals like novice advertisers to professional Internet marketers, everyone wants their ads to be placed at the top position before the organic results in order to grab the attention from visitors and their customers. There might be chances of getting best Return on Investment (ROI), when your ads are placed [...]

As a search engine marketing professionals like novice advertisers to professional Internet marketers, everyone wants their ads to be placed at the top position before the organic results in order to grab the attention from visitors and their customers. There might be chances of getting best Return on Investment (ROI), when your ads are placed at the right position with good adtext.

Do you know how the ads are positioned on content and search networks? Yes of course it is based on their Ad Rank. The highest Ad Rank of Ads will appear in the first position, and so on down the page.
Ad rank is nothing but the position of keyword targeted ads in search and content pages. Here we are going to see how Google determines Ad Rank as well as each advertiser’s actual cost per click.

AdRank:

AdRank = Max. CPC x Quality Score

AdRank is measured by multiplying the maximum cost per click bid that the advertiser is willing to pay by the Quality Score of that advertisers keyword. Ad position is then calculated by the advertiser’s AdRank. According to that advertisers ad will be positioned on highest or lowest position in Google search and content networks.

Advertiser Max CPC Quality Score Ad rank Position
Advertiser A $0.40 6 $0.40 x 6 = 2.4 1
Advertiser B $0.35 5 $0.35 x 5 = 1.8 2
Advertiser C $0.80 2 $0.80 x 2 = 1.6 3
Advertiser D $1.00 1 $1.00 x 1= 1 4
Advertiser E $0.05 5 $0.05 x 5 = .3 5
Advertiser F $0.10 2 $0.10 x 3 = .2 6

From the above example you can find that, in spite of Advertiser D is bidding well while comparing all of his competitors his ads will show in the 4th position due to his low Quality Score.

Determining Actual CPC:

Actual CPC = (AdRank to hit /Quality Score of Advertiser) + $.01

An advertiser’s actual CPC is measured by dividing the AdRank to hit (the AdRank of the competitor below them) by their own Quality Score plus $.01. The least positioned ad will be the minimum price recommended by Google to display on the Adwords page.

Advertiser Max CPC Quality Score Ad rank Position Actual CPC
Advertiser A $0.40 6 $0.40 x 6 = 2.4 1 (1.8/6) + $.01 = $0.31
Advertiser B $0.35 5 $0.35 x 5 = 1.8 2 (1.6/5) + $.01 = $0.33
Advertiser C $0.80 2 $0.80 x 2 = 1.6 3 (1/2) + $.01 = $0.51
Advertiser D $1.00 1 $1.00 x 1= 1 4 (0.3/1) + $.01 = $0.31
Advertiser E $0.05 5 $0.05 x 5 = .3 5 (0.2/5) + $.01 = $0.05
Advertiser F $0.10 2 $0.10 x 3 = .2 6 Minimum Bid

From the above example you can find that, since the quality score of Advertiser C is very low, he needs to pay more amounts to beat Advertiser E.

The quality score speaks a lot in this. From the below example you can find the value of quality score. By increasing the quality score, the ad rank will also automatically increase to hit the top positions. In the below table, Advertiser B has increased their Quality score and check how his rank get increased to hit the top position.

Advertiser Max CPC Quality Score Ad rank Position Actual CPC
Advertiser A $0.40 6 $0.40 x 6 = 2.4 2 (3.2/6) + $.01 = $0.54
Advertiser B $0.35 9 $0.35 x 9 = 3.2 1 (1.6/9) + $.01 = $0.19
Advertiser C $0.80 2 $0.80 x 2 = 1.6 3 (1/2) + $.01 = $0.51
Advertiser D $1.00 1 $1.00 x 1= 1 4 (0.3/1) + $.01 = $0.31
Advertiser E $0.05 5 $0.05 x 5 = .3 5 (0.2/5) + $.01 = $0.05
Advertiser F $0.10 2 $0.10 x 3 = .2 6 Minimum Bid

Quality Score is the good way to reach the desired top positions and reduce your costs. To become a Adwords star and to have a success with Adwords, you must improve your CTR, the relevance of your Ads, quality of your landing pages and the speed of the landing pages.

Disclaimer: The post is completely based on individual thoughts and SEO Services Group bears no responsibilities for the thoughts reflected in the post.


Popularity: 100% [?]

[Post to Twitter] Tweet This Post 

Related Posts

This website uses IntenseDebate comments, but they are not currently loaded because either your browser doesn't support JavaScript, or they didn't load fast enough.

3 Responses to “Formula to Calculate Google Adwords Ad Rank and Actual CPC”

  1. Rehan on October 7th, 2010 1:25 pm

    There's a mistake in the last table… Advertiser A's actual CPC will be (1.6/6) + $0.01 = $0.28 and Advertiser B's actual CPC will be (2.4/9) + $.01 = $0.28. The table currently shows $0.54 actual CPC for Advertiser A, which is higher than the $0.40 bid and therefore not possible.

  2. blooMarty on October 7th, 2010 8:26 pm

    Nice post, just what I've been looking for :) However, there's an error in the second table. The Actual CPC's are 1.6/6 for Advertiser A and 2.4/9 for Advertiser B.

  3. Rampratap on May 30th, 2012 10:58 am

    there is some mistake in third table. you are assign in second table that if we calculate average cpc then we take ad rank below them keyword. not to above position keyword Advertiser A's actual CPC will be (1.6/6) + $0.01 = $0.28 and Advertiser B's actual CPC will be (2.4/9) + $.01 = $0.28

Leave a Reply




RSS Feeds Subscription RSS Email Subscription