Why Does Google Use a Quality Score in Determining Ad Position?

Google wants to display the most relevant advertiser ads to their searchers. That makes users happy because they get more relevant ads, makes advertisers happier because they get better results, and makes Google happier because happy users and happy advertisers = more people using the Adwords system.

Google Ad Auction Pricing Model: Pre- and Post-Quality Score

Google Ad Auction & Bidding: PRE-QUALITY SCORE & Highest Bid Buys Best Ad Position Advertisers set a max bid but the price they actually paid for a click was equal to the bid of the advertiser below them, as detailed below:
Actual CPC Max Bid (price paid) Ad Position Advertiser #1 $4 $3 1 Advertiser #2 $3 $2 2 Advertiser #3 $2 $1 3 Advertiser #4 $1 Not displayed

What Are the 3 Components to Google Quality Score Calculation?

1. Click Thru Rate (CTR) Most important component of Google Quality Score calculation By allowing users to vote thru clicks Google has millions of people helping decide which ads best match particular search queries. You need clicks to improve your quality score; therefore new advertisers often have to start their campaigns with higher max bids to ensure they have good asd position out of the gate. As they gain clicks and improve their quality scores they can reduce their max bids and still preserve their good ad positions. 2. Relevancy Second most important component of Google Quality Score calculation Relevancy of the keywords to the search query as well as ad text is important to Google. They determine relevancy by analyzing language and context of test ads and landing pages to determine how well it relates to the search query, therefore the likely searcher intent. 3. Landing Page Quality Third most important component of Google Quality Score Calculation An ad is only useful to a searcher if the landing page helps them to find the products or information they are looking for. A high quality landing page should have original and relevant content related to the search query, fast load time, be easy to navigate, and be transparent about the nature of the advertisers business and how they plan on using a site visitors information.

Google Ad Auction & Bidding: POST QUALITY SCORE & Introduction of Ad Rank Max Bid times Quality Score equals Ad Rank and Ad Rank determines Ad Position. Highest Ad Rank = Highest Ad Position and the better the Ad Position the higher the CTR which improves Quality Score even further (the QS Virtuous Cycle).
Quality Ad Max Bid x Score = Ad Rank Position Advertiser #1 $4 x 1 = 4 Not displayed Advertiser #2 $3 x 3 = 9 2 Advertiser #3 $2 x 6 = 12 1 Advertiser #4 $1 x 8 = 8 3

Actual Cost per Click Calculation Example:

Quality Max Bid x Score = Ad Rank Advertiser #1 $4 x 8 = 32 Advertiser #2 $4 x 6 = 24 Advertiser #3 $4 x 3 = 12 Actual CPC (24/8) = $3 (12/6) = $2 Minimum price

Cost per Click Equation:

P1 = (B2 x Q2)/Q1
Where P1 = CPC of Advertiser #1 B2 = Advertiser #2 Max Bid Q2 = Advertiser #2 Quality Score Q1 = Advertiser #1 Quality Score Therefore:

P1 = ($4 x 6)/8 = $24/8 = $3

Increasing your quality score decreases your cost per click as illustrated below. Where Quality Score increased from an 8 to a 10, the result is a decreased CPC from $3 to $2.40.
Quality Max Bid x Score = Ad Rank Advertiser #1 $4 x Q1 (10) = 40 Advertiser #2 B2 ($4) x Q2 (6) = Actual CPC ($4 x 6 /10) = $2.40

Components of Quality Score Calculation

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