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How Does the AdWords Auction Work? [Infographic]

November 16, 2011
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AdWords Tips

If you work in the search marketing industry, you may have found yourself having a conversation somewhat like this one (the same conversation I have every time I tell a "regular person" what I do):

Regular Person: So, what do you do?

Me: I work as a writer for a software startup.

Regular Person: What kind of software?

Me: Um, search marketing software?

Regular Person: So ... like Google?

Me: Well, yeah, sort of. We make software that helps people advertise on Google.

If this regular person is curious enough to know more (rare), I usually find it helpful to explain that Google advertising functions similarly to an auction. In the off chance that they tell me advertising on Google does not work, I tell them that our whole company exists because it does work.

How Quality Score Works

How Does Google AdWords Work?

Since there are so many people out there who don't really know how this "AdWords auction" works and are wondering what is PPC, we thought it would be helpful to illustrate it. Below you'll find our latest infographic, "How Does the AdWords Auction Work?" This infographic illustrates how exactly the AdWords auction works, including:

  • What gets entered into each “auction”
  • How Google determines which ads are shown where
  • How Google determines what advertisers pay

And lots more interesting tidbits about how Google AdWords works. Click the image to see for yourself and learn Google AdWords.

How AdWords Works

Comments

This infographic is fabulous. It can be so hard to explain this to colleagues, clients and friends. This is going to be a permanent reference piece! Thanks for publishing it.

We posted the infographic on our site with a link-back: http://a.sw.io/RCS0kK4

Elisa Gabbert
Nov 16, 2011

Thanks so much, Antonia! Really glad to hear you found it useful!

ravanraj (not verified)
May 29, 2014

i dont have any adds to advertise then how to get the adds

Really good - any chance of doing a copy & paste with £ and even € (not that we'll need that for long!)
People on this side of the pond can be a bit parochial :)
Thanks
John

We're often asked to explain the mechanics of the AdWords auction system, but to do so without using industry terminology can be difficult.

Your excellent infographic will make this much easier, so we're pleased to have posted your infographic on our site with a link-back: http://www.primointeractive.com/go/adwords-explained.

Thank you!

Awesome Infographic! Good job and thank you for posting!

Elisa Gabbert
Nov 17, 2011

Thanks John, Larry and Chester for stopping by, glad you liked the infographic! We'll get right to work on an international version. ;)

Thanks so much guys! This is awesome. 

Nov 17, 2011

Very clear-explains PPC in very simple terms that even I can understand!

Nov 18, 2011

Excellent! Request for permission to repost on my company blog and credit will of course be given :) Company: Zymora Blog:

Elisa Gabbert
Nov 18, 2011

Of course, you are welcome to repost with a link back! You'll find embed code below the infographic here.

 

Excellent overview of how AdWords works, thank you. smiley
 
Infographics can often fail to deliver but this does a great job of condensing fairly complicated information in to a form most will understand. 

Johnny (not verified)
Nov 22, 2011

Hey pretty cool infographic of AdWords. It is simple scheme of how AdWords works. Thanks for sharing

I wrote a complete post on this topic today since you did not post it for me last week. Not sure why my comment was not posted but actually it worked out for the best since I got a very nice post created out of it. Thank you for the infograpic. My post: Learn Google AdWords and Local SEO Techniques. http://linkworxseo.wordpress.com/2011/11/24/learn-valuable-google-adwords-and-local-seo-techniques/

Elisa Gabbert
Nov 28, 2011

Sorry, Ty, your comment must have slipped through the cracks! Thanks for the link!

Thanks so much for this!!! This is complicated to explain so this is awesome.

No problem, I have been getting some good feedback from this post on my blog. I of course wrote something different but the informational graphic was a tremendous help. Even some people who have been doing PPC for sometime have said this was enlightening information. 

Sudhir Sharma (not verified)
Jun 05, 2012

Hi Elisa,

I have a question on actual CPC.

In given example of Actual CPC, if we only replace Quality Score of "Advertiser-I" from 10 to 8 then what would be the Actual CPC of "Advertiser-I".

Thanks,

Sudhir 

 

 
 

Elisa Gabbert
Jun 05, 2012

Hi Sudhir,

With a little help from Larry Kim:

if advertiser I's quality score falls from 10 to 8, then it’s a bit confusing because now there's a "tie" situation (meaning both Advertiser I and Advertiser II have adranks of 16. Who wins the top spot??).

Let’s just say for this example, "Advertiser I" quality score falls from 10 to 8.1.

This way, "Advertiser I" still wins the top spot in the ad auction, and if their ad is clicked on,  they pay the (adrank to beat) / (their quality score) + 0.01

So basically, the adrank to beat is still advertiser II's adrank of 16. Their Quality Score is 8.1

so, 16/8.1 + 0.01 = $1.99

Meaning, a decrease of quality score from 10 to 8.1 results in an increase in actual cost per click from $1.61 to $1.99

Hope that helps!

Sep 07, 2012

This great infographic will definately help all those visual learning people out there. So much easier to understand than tons and tons of words.

How can I choose my keywords by adwords for my blogsite?

Please inform me.

Craig (not verified)
Oct 25, 2012

Outstanding! Thank-you.

Dec 18, 2012

Thanks for making this clear for me. I'm planning on trying out adwords but wasn't sure how it worked.

Great read Elisa, really enoyed that.. and already implementing this to our Ad campaign.

Hi Elisa, great post and info graphic. We've been running our adwords campaign for about 2 months now and after coming scross your post we will be making some changes!

Thanks!

This is great! Suprised im only seeing it now tho ;/ Anything changed since that you think is worth mentioning?

Anonymous (not verified)
Aug 16, 2013

But what if you DIDN'T "enjoy it"?  Guess I'll try to leave a message anyway.

What I'm hearing is that this adword thing works.  But, works for WHO?  The adword industry?  I'll bet! Google? Double ditto!!  The advertisers in general?  Not so sure. Hopefully the latter, but I'm far from convinced. Been contacted by two companies selling access to this new universe and both of them talked faster than a used car salesmen on crack.  What they COULDN'T tell me or, WOULDN'T tell me was HOW and WHY it worked.  Now maybe I'm a little thick, but they threw out more techno-jargon than a couple of machine language programmers.  When I asked them if they could slow down, define their terms, and valedate the claims they were making using them, they quickly became disinterested and gave me the "Are you interested or not?" ultimatium.  That, friends, is exactly what high pressure salesmen are trained to do when they are pressured by potential clients who want to know the reality of the deal they are pitching.  I don't know if adwords works for the average advertiser, but I see all of the signs that set my red lights flashing.  Do a search and what you mostly find is sites run by adwords companies.  But try to find actual testamonials of advertisers  that are not filtered by the people selling the advertising and you'll have difficulty.  This doesn't smell right.  It is a good sign, though, if you can even read these words. 

We are currently using this inforgraphic to train new staff, excellent work guys! Will be providing a link back very soon thanks!

Elisa Gabbert
Aug 23, 2013

Supercool, thanks!!

Great post Elisa..

We've shared the info graphic on our facebook & twitter..

Thanks!

Apr 07, 2014

I'm debating whether to sign up for an advertisement and this really helps! Thank you for the beautiful descriptions and illustration

Kitty

 

Several of our clients have asked us about how Google Adwords works and how their Quality Score affects their cost-per-click. 

We decided to do a post specifically on How to Understand Your PPC Quality Scores but had to include your fantastic infographic and article. We have placed

a link back to your article as it has additional information we feel will help everyone.should know.

Fair disclosure. I am a Wordstream partner and these folks know what they are talking about.

Thanks again.

Bill

Elisa Gabbert
May 14, 2014

Thanks, Bill!

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