Instructor: How to calculate your ad rank.
You now understand quality score and the auction,
so in this video we're going to go through exactly
how Google determines your ad rank.
As discussed in the last video,
your ad rank number is super important
and determines how high your ad is positioned
on the Google search engine results page.
The old ad rank formula didn't account for quality score.
Essentially, the highest bidder won the highest spot,
as your maximum cost-per-click was the most important factor
when calculating ad rank.
However, as you all already know by now,
this formula wasn't the best.
So what Google did was change this in 2005,
and they actually changed this drastically.
So let's have a look at the new ad rank formula.
So the new ad rank formula
is now ad rank equals your maximum cost-per-click bid
times your quality score.
This new formula is way more comprehensive
than the old formula.
The formula stayed this way until 2013
until Google introduced the expected impact
of ad extensions on CTR as part of the ad rank formula.
Now, if you're not sure what a ad extension is,
then don't worry,
as I'm going to be going through that in great detail
in the next section of the course.
However, for now, all you need to know is
that ad extensions are important,
and they can help you improve your CTR.
Google discovered that different source of ad extensions,
such as call-outs, reviews, can have a positive on your CTR.
And as a result, they included these projections
into the ad rank formula.
But even till this date,
no one is certain exactly how the formula changed
to accommodate these ad extension factors.
It's widely accepted that ad extensions account
for about 20% of the quality score portion
of the current ad rank formula.
But whether or not that number is precisely accurate,
we can be pretty confident that it's not much more than that
because so many advertisers are using ad extensions
and because it's a pretty small factor by itself.
As a result, we'll continue
by evaluating some example scenarios
with the primary formula,
which is ad rank equals maximum CPC times quality score.
So to see how this all works in the real world,
let's go through a live example auction.
Let's imagine we have five different people.
We have Ben, Sally, Tom, Simon, and Louise.
Now, all five of these individuals are bidding
on the same keyword.
So Ben goes into his Google Ads account,
and he sets his maximum cost-per-click at $10.
Sally sets her maximum cost-per-click at $8.
Tom sets his maximum CPC at $6.50.
Simon does $5.50.
And Louise sets her maximum CPC at $2.
Now, let's just imagine Ben has a quality score of one,
Sally has a quality score of two,
Tom has a quality score of seven,
Simon has six, and Louise has 10.
Now, if we use the formula above,
ad rank equals maximum CPC bid times quality score,
we can actually figure out the ad rank
for all of these different advertisers.
So Ben's ad rank would be 10, as 10 times 1 is 10.
Sally's ad rank would be 16.
Tom's ad rank would be 45.5.
Simon would have a ad rank of 33.
And Louise would have a ad rank of 20.
Now, based on this, we can figure out
which advertiser is going to have their ad shown
in the highest position on Google.
And as you can see, Tom has the highest ad rank of 45.5.
So as a result, Tom is going to be position one,
meaning his ad is going to show the highest on Google.
Position two is going to be followed by Simon
with a ad rank of 33, which is the second highest.
Position three is going to go to Louise,
with a ad rank of 20.
And then Sally would get the fourth ad spot of 16.
So in this scenario, Ben would actually miss out,
and his ad would not be shown,
as he has the lowest ad rank of 10,
which puts him in position five.
And remember, there's only four positions for this auction.
What's really good to note is that Ben has the maximum CPC.
He's told Google the maximum he's willing
to pay per click is $10.
That is almost double than what Simon is willing to pay,
where his maximum CPC is $5.50.
Ben is literally willing to pay double that.
However, his ad is now showing.
The reason being is
because he has a low quality score of just one,
where Simon has a quality score of six.
So as you can see, your maximum CPC is important.
However, what's even more important is your quality score.
This is why it's so important to try your hardest
to make sure you had the highest quality score possible,
as if you get it right, you can have a lower maximum CPC.
If Simon was able to improve his landing page and his CTR
and as a result get his quality score all the way up
from 6 up to 10, he would now have the highest ad rank,
and he would take the top spot with his ad.
This would mean he would be in position one,
and in position two would be Tom,
and then Louise would be in position three as it was before,
and Sally would remain in position four.
Notice how Simon was able to increase his ad rank
without increasing his maximum CPC.
Again, this just shows you how important quality score is.
The same applies in the opposite direction.
Let's imagine Louise is not able
to maintain her quality score of 10, and it drops down to 6.
This would now mean she has a ad rank of 12,
which is the fourth highest.
As a result,
her ad will now drop down to the fourth ad slot,
and she would be in position four just below Sally.
So like I just said, quality score is super important
and will play a massive role
in regards to where your ad is going to show in Google.
So now that we have a good understanding of ad rank,
what we're going to do in the next video,
we're going to go through exactly how Google determines
how much you pay per click.
I'll see you there.