Introduction to Google Adwords auction system

// April 30th, 2009 // 1 Comment » // work

I often explain to people how the advertisement system from Google (Adwords) works and most people get the basics. If you pay a higher cost per click (CPC) you will get a higher position. Besides the CPC Google also uses the Quality score and this is where it gets more complicated. The Quality score is determined by the click through ratio (CTR), relevance and the landingpage you are linking to. Even for me this is something that can be hard to explain in a few minutes.

Below is a great video from Hal Varian (Chief Economist at Google) where he explains how both your max CPC bid and Quality score determine how much you pay for a click when advertising with Adwords. If you are interested in how Adwords works (and don’t know already) you definitely have to watch it!