May 12th, 2008
Inside Google’s Advertisers’ Auctions
Here’s a great explanation of how Google’s Adsense and Adwords advertising/publishing program works.
Basically, there’s an internal auction of all keywords and advertisers get to bid on them. So the CPC is really determined by advertisers.
Now, it’s up to you to find out which Publisher’s program gives you the best CPC for your money.
But how do they actually work? There are several steps in the process.
1) Each advertiser enters a list of keywords, ads, and bids.
2) When a user enters a query, Google compiles a list of all the ads whose keywords match that query.
3) The list of ads is then ordered based on the bids and the Ad Quality Scores, which measure the relevance of the ad to the user.
4) The highest ranked ad is displayed in the most prominent position, the second highest ranked ad gets the second most prominent position, and so on.
5) If the user clicks on an ad, the advertiser is charged a price that depends on the bid and Quality Score of the advertiser below it. The price charged is the minimum necessary to retain the advertiser’s position in the list.
