CPC-Bid – Controlling Your Search Budget

CPC-Bid is the amount you are willing to pay if a user clicks on an ad. There are various factors that determine how much you actually have to pay:

• The Quality Score of your ad.
• The level of competition.

High Quality Score means that you need pay less than your maximum CPC-bid. Let’s see an example of how it works

There are two advertisers, Company A and Company B who both compete for the same keyword. They set different maximum CPC values in order to be the top ad: £2 and £3, respectively. A user initiates a search and Google determines both advertiser’s ad relevance, so Google needs to determine which one of them should appear first and how much should each of them pay.

Google first multiplies the maximum CPC-bid with the ad`s Quality Score. The result is the Ad Rank value and Company A is going to be ranked first, due to the fact that their ad is more relevant and that balances out their lower CPC-bid.

Now that the first place is determined, Google needs to figure out, how much should each company pay. To establish the cost of the better-ranked ad, Google divides the Ad Rank value of the Company B with the Quality Score of Company A and adds £0.01 to the amount. Company B will pay the minimum price for that auction.