How Google Decides Your Cost Per Click Price

7/11/2013 with

The highest high bid price does not necessarily mean you get the top spot in the search results. Not quite sure what it means? In this Google Adwords video, we share how Google decides how much you pay for every click you get on your ad.



Click HERE to download the MP3 and full PDF transcript


In this Video:

00:13 – How Google Decides The Cost Per Click
00:34 – It’s Free Until It Gets Clicked
00:45 – Google’s Ad Ranking Factor
01:01 – How Ad Rank Is Determined By Google
01:10 – Here’s a Sample
01:40 – Google’s Charge Computation
02:06 – An Example
02:28 – Why Knowing This Is Important
02:54 – What Happens When You Manage It Wrong

Subscribe: iTunes

How do Google decide how much you pay when someone clicks on your Adwords ad? I’m going to answer that for you in this update.

I often get a lot of people go to me asking the question, “How did Google decide how much they charge me when someone clicks on my ad?” It’s a very, very good question and I am going to hope to answer it for you in this update.

One of the great things about Google Adwords search ads is you don’t get charged when you have your ads shown, you only get charged when someone clicks on your ad. In order to determine the price of pay per click when someone clicks on your ads we must first explain how Google determine where your ad will rank within the search results. In order to determine this, they use a combination of quality score, which is determined by how relevant your ads and landing page are in combination with how much you are willing to spend to have your ad clicked on. This is called your maximum bid. The calculation is simply this: quality score times by maximum bid. Let’s use an example to illustrate this.

computing on the blackboard

Lets’ say that you’re willing to spend a maximum of $10 per click and that your quality score is 10/10. That means your rank ad number is 10×10=100. Someone else might be willing to spend double than what you are willing to spend per click ($20) but only have a quality score of 4, their ad rank would be 80. Meaning they’re positioned lower than you within the result.

So let’s discuss how Google determine the cost per click. Whilst you’re willing to spend up to $10 for someone to click on your ad, more commonly you don’t get actually charged that. What Google do is charge you the price that would be once cent above the price that you’d have to pay if you slipped down a position.

So using the ad rank of 80 in a second position website, let’s use an example. You could bring your cost per click down to $8, have a quality score of 10; 8×10 is 80. That would slip you down in to the second position. So Google, despite the fact that you’re willing to spend $10 are only going to charge you $8.01.

What’s the lesson here? It’s not necessarily going to cost you your maximum bid to have your ads clicked on. In fact the more relevant that you can make your ads, and the more relevant that you can make your landing page, up goes your quality score, and down goes your cost per click. This is exactly why I recommend you using a professional pay per click provider because in the wrong hands, you can be spending far more on your clicks than you necessarily need to. A good provider will know how to make your ads relevant, increase your quality score, and drive down your cost per click.

If you would like us to get your campaign performing better and reducing your cost per click, please get in touch with us at This has been James Reynolds with another pay per click Google Adwords update. If you’ve enjoyed this one, please share it among your social networks or leave a comment beneath wherever you find this video or audio. I’ll see you again back here real soon!

About James Reynolds

James is passionate about helping you get more traffic and sales from search engines. Join 3223+ subscribers who get traffic tips from James weekly