How Bids and QS Affect Rankings and Costs

Obviously, any change in the system affects not only you but other advertisers as well. In fact, since CTRs change for each search, the system is in a constant state of flux. And this assumes the same number of advertisers at all times. In reality, new advertisers come, others leave, not to mention that not all advertise at all times. Some pause their campaigns on certain days of the week or even the time of day. Some have exhausted their daily budget. All this affects your rank and your costs and I haven’t even mentioned those who adjust their bids frequently.

Here are five advertisers. I’ve used one decimal point for the QS to illustrate, the price they pay is rounded to the nearest penny, just as Google does:

Advertiser Bid QS Ad Rank Pays
A1 $0.30 9.3 279 $0.23
A2 $0.28 7.5 210 $0.28
A3 $0.25 8.3 208 $0.23
A4 $0.25 7.6 190 $0.18
A5 $0.20 7.0 140 $0.20

If A3 increases his bid to $0.26, the following results (I’ve highlighted the changes in orange):

Advertiser Bid QS Ad Rank Pays
A1 $0.30 9.3 279 $0.23
A3 $0.26 8.3 216 $0.25
A2 $0.25 8.3 208 $0.25
A4 $0.25 7.6 190 $0.18
A5 $0.20 7.0 140 $0.20

A3′s payout went up by two cents. A1′s has remained the same but only because of similar ad rank between A2 and A3, while A2 has lost a position and paying three cents less because now he’s competing with A4. Now, instead of increasing his bid, A3 creates an ad with better CTR which increases his QS to 8.8 while leaving his bid at 25 cents, you get the following:

Advertiser Bid QS Ad Rank Pays
A1 $0.30 9.3 279 $0.24
A3 $0.25 8.8 220 $0.24
A2 $0.28 8.3 208 $0.25
A4 $0.25 7.6 190 $0.18
A5 $0.20 7.0 140 $0.20

That causes A3 to move up one position as it did when he simply increased his bid. He again affects A1′s payout but this time it is more pronounced. A1 pays one more cent than before. A1′s own payout increases by one cent instead of the two if he simply increases his bid. He therefore saves one penny by having a better ad. A2 has lost a position but paying three cents less.

A change of QS will have an effect on your payout but not as large as changing your bid. The moral is, always try to improve your ads for a better
QS.

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