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What is Ad Rank and how is calculated?

To determine your ad position or even if your ads should show Google Ads uses a value called Ad Rank.

In general, higher ranking ads get higher CTR (Click through rate).

How Ad Rank is calculated on the Search Network
Your ad rank is calculated by your CPC (Cost per click) bid multiplied by your Quality Score.

However, at a high level, Ad Rank is also impacted by these factors:
– The landing page experience.
– The expected CTR (Click through rate).
– The ad relevance.
– Your bid – a higher bid can help to win the auction.
– The context of the person’s search – the person’s location at the time of the search, the type of device they’re using (e.g., mobile or desktop), the time of the search, the nature of the search terms, other ads and search results that show on the page, and other user signals and attributes.
– Ad extensions and other ad formats.
– The Ad Rank thresholds –  A minimum thresholds for an ad to show.

For your ad to rank #1, you need a high Quality Score and eligibility, as only high quality ads can appear on the top slot.

Your Ad Rank is recalculated each time your ad is eligible to appear and to compete in an auction.

Position – the relative position of your ad in relation to other ads on the result page
The example below shows GOOGLE wins position number 1, despite Advertiser 3 bidding the same, and Advertiser 4 bidding even higher.


This is because GOOGLE’s Quality Score is higher than Advertiser 3 and Advertiser 4.

How to optimise the Quality Score
Quality Score optimisations for Search campaigns
Quality Score optimisations for Display campaigns

How Ad Rank is calculated on the Display Network
Similarly to the Search Network ads are ranked based on your CPC (Cost per click) bid and Quality Score. 

Differences between the Display Network ad auction and the Google Ads auction
– You’ll pay what’s required to rank higher than the next best ad position only for incremental clicks that you get from being in the current position.
– You’ll pay the price that you’d have for the next best ad position for the rest of the clicks.
– You may pay an additional service fee for ads that use audience targeting. In such cases, your maximum bid is reduced before the auction and the fee is added to the closing auction price. 

At a high level, think of Ad Rank as having six factors:

  1. Your bid – When you set your bid, you’re telling Google Ads the maximum amount that you’re willing to pay for a click on your ad. How much you actually end up paying is often less, and you can change your bid at any time.
  2. The quality of your ads and landing page – Google Ads also looks at how relevant and useful your ad and the website it links to are to the person who’ll see it. Our assessment of the quality of your ad is summarised in your Quality Score, which you can monitor – and work to improve – in your Google Ads account.
  3. The Ad Rank thresholds – To help ensure high quality ads, we set minimum thresholds that an ad must achieve to show.
  4. The competitiveness of an auction – If two ads competing for the same position have similar ad ranks, each will have a similar opportunity to win that position. As the gap in ad rank between two advertisers’ ads grows, the higher-ranking ad will be more likely to win but also may pay a higher cost per click for the benefit of the increased certainty of winning.
  5. The context of the person’s search – With the ad auction, context matters. When calculating Ad Rank, we look at the search terms that the person has entered, the person’s location at the time of the search, the type of device that they’re using (e.g. mobile or desktop), the time of the search, the nature of the search terms, other ads and search results that show on the page and other user signals and attributes.
  6. The expected impact from your ad extensions and other ad formats – When you create your ad, you have the option to add additional information to your ad, such as a phone number, or more links to specific pages on your site. These are called ad extensions. Google Ads estimates how extensions and other ad formats you use will impact your ad’s performance.


Example
Here’s a simplified example of how Ad Rank works. It doesn’t account for all of the factors discussed above, but instead aims to give you a high-level overview of our algorithms:

Assume five advertisers are competing for a maximum of four ad positions above search results on the Google search results page. The respective Ad Rank of each of the advertisers is, say, 80, 50, 30, 10 and 5.

If the minimum Ad Rank necessary to show above the search results is, say, 40, only the first two advertisers (with Ad Ranks of 80 and 50) exceed the minimum and show above the search results.

If the minimum Ad Rank necessary to show below the search results is 8, then two of the three remaining advertisers (with Ad Ranks of 30 and 10) will show beneath the search results. The advertiser with an Ad Rank of 5 didn’t meet the minimum Ad Rank and so won’t show at all.

For top and absolute top metrics, the advertiser with an Ad Rank of 80 (in the first position above the results) will have 1 impression counting both for top and absolute top, the advertiser with Ad Rank of 50 (in the second position above the search results) will have 1 impression on top, and the advertiser with an Ad Rank of 30 (in the first position below the search results) will have 0 impressions on top or absolute top, same as the advertiser with an Ad Rank of 10 (in the second position below search results).

To improve your share of the top and absolute top location on the search result page, you can:

  • Improve the quality of your ads and landing page experience
  • Increase your bid

Extract from my Book ‘Making Google Ads Work’.

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