Ads is what runs the wheels at Google. It’s a widely known fact that Google’s primary source of income is from advertising and Google Ads is the advertising service by Google which allows businesses to place their ad on Google’s Search Engine Results Page (SERP) as well as other non-Google sites on Google’s massive advertising network.

We’ve all seen ads on Google’s SERP. These appear on top of search results and look very much like organic search results except for a small box against them that says ‘Ad’. Duh! So if you can’t wait for your website to crawl its way up to the top by organic means and Search Engine Optimisation (SEO), which is usually a long and slow process, you can pay for it.

Google handles billions of search requests every day from all over the world and the results page is one big platform for placing ads that can reach millions of people in a very short time. That’s what Google does through Ads.

To put in simpler words, you’re paying for space on Google’s SERP just like you’d pay for space on a magazine or a newspaper to display your ad. But in Google Ads, unlike newspapers, you don’t pay for every time your ad is being displayed. You pay for the number of times your ad is being clicked on. And when there are multiple advertisers trying to advertise for the same thing there is a bidding process involved for the top spot.


Google Ads uses an auction based service to select ads where advertisers bid for a position on the results page. But this isn’t one of your straightforward auctions where hands pop up one after the other until the hammer comes down and one of the filthy rich parties gets that painting which makes no sense to anyone. Ads auctions do their bit of justice by selecting the winner through something called AdRank.

Now to understand AdRank we must understand two things first – Maximum bid and Quality Score.

Maximum Bid

Users enter search terms on Google to find what they’re looking for which leads them to the search engine results page. These search terms (not limited to exact matches) are used as keywords for auction. Advertisers identify keywords they would like to bid on, so that when these keywords are entered by a user the advertiser can show their ad on the subsequent results page. Each keyword has a Cost Per Click (CPC) bid amount. Google then enters your keywords into the auction with the maximum bid you’ve specified. But as mentioned earlier, the highest bid doesn’t always have to get the top spot. Here comes quality score.

Quality Score

Quality Score is evaluated by a variety of factors. One of them is the relevance of your landing page. If you’re advertising for bouquets but the link on your ad leads the customer to music CDs, it’s going to be a really bad day. The landing page has to be relevant and should lead the customer directly to what he’s looking for. If he needs music CDs wait until she has dumped him. He will definitely need them to get through it.

Another factor is Click Through Rate, better known as CTR. Click Through Rate is a ratio of the number of clicks your ad has received to the number of impressions i.e number of times your ad has been viewed.

Click Through Rate = Number of Clicks / Number of impressions

This shows the rate at which your ad is leading customers to your landing page. If your ad is being viewed but ignored like the safety instruction manual in every aircraft, your CTR is going to go south in no time. Having a high CTR is important to build your quality score.

Google also compares the search terms of the user and checks how relevant your ad is to him and using all these factors determines a quality score for your ad.

Now that Google has the maximum bid and the quality score it calculates the AdRank.

AdRank = Maximum bid x Quality Score

AdRank is determined by multiplying your maximum bid with your quality score. The higher your quality score is, the lower your maximum bid can be, so maintaining a high quality score is essential for your campaign’s success and also to keep you from burning a hole through your pockets. It is also very important to invest on the right keywords. Having irrelevant keywords can hurt your ad campaign and your business.

These auctions run billions of times every month. This is how advertisers pay Google for connecting with potential customers. The user gets relevant ads and the advertiser gets his ad shown to relevant people. Helps both of them. And helps Google by a huge margin (show me the money!)