You ever wonder how Google determines which ads to show after you type a search phrase?  You may think whoever pays the most gets the top spot.  But that’s not the case.

First and foremost, Google users want ads to be relevant and closely related to what they are searching for.  And Google wants to provide a good experience for both users and advertisers.  Therefore, only the most relevant ads get the highest positions on the search results page.  This ultimately creates the best experience for the user.

So how does Google determine which ads are the most relevant?

The amount you bid on the keyword is certainly a factor, but only one of several.

Other factors in addition to advertiser’s bid are:

  1. Your expected Click-Through Rate: Google’s prediction of how often your ad will be clicked on when shown.
  2. Your ad’s Landing Page Experience:
    • Should have relevant and original content
    • Should be easy to navigate
    • Should be transparent about the nature of your business – how your site interacts with the visitor’s computer – how you intend to use the visitor’s personal information
  3. Your ad’s Relevance: Google analyzes the language in your ad to determine how well it relates to the search query – this prevents advertisers from simply paying their way onto the search page with ads that are unrelated.
  4. Your Ad Formats: These are enhancements to ads such as phone numbers and sitelinks which give users more information about your business and more reason to click on your ad.

These factors are used to calculate a score for your ad called Ad Rank.  This is the value that’s used to determine your ad position or whether your ads will show at all.

Here’s an 8 minute video from Hal Varian, Chief Economist at Google, that explains it really well.