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Google Adwords: CPC Calculator

Google Adwords: CPC Calculator

Hello I’m Uzair, so the question is how
does Google AdWords decide the minimum bid required for your ad. It’s a great
question and there is a very super simple and a super clever formula
devised by Google to calculate just that. Hello Uzair and thank you for watching this video. So how does Google decide the
minimum bid for every ad or for every advertiser and there’s a very simple
formula which has been devised by Google so let’s go on to my Google slides and
I’m gonna explain and show you how Google calculates your cost per click.
Okay so as you may know every keyword has a quality score between one and ten
one being the worst ten being the best so you want to aim as high as possible
because it’s going to affect your cost per click. As you call it the score goes
up you get a discount and the quality score goes down you get charged more by Google,
so the minimum you need to start with is five which is the Google benchmark so
always aim for a minimum of five as your starting quality score and then keep on
working to make it as high as possible. Okay so let’s work out your price, how
does Google work out your price so you’ve got your formula over here the ad
rank of the advertiser below you divided by your quality score plus one pence so
you will only pay a penny more than the second-best advertiser, so even if you
bid a lot more, Google will not charge you that. So
here’s how this formula works, so we have here 4 advertisers ranked one two
three and four, now advertiser ranked number one is bidding a maximum of £2, £4, £6 and £8. Although you may think that advertiser
number four who’s bidding the most should be number one, Google does not
take into account that throwing more money at Google will buy you the highest
position you can but it will cost you a lot more money but if you do it the
Google way you are going to pay the least amount of money for the highest ad
rank. All right so we’ve got your maximum bids so these are the bids which are
being made by the 4 advertisers then we come on to college go advertise the
rank number one has got a quality score of ten, four, two and one, so the way
the ad rank is calculated is max bid times by the quality score, so 2 times 10
is 20, 4 times 4 16, 6 times 2 12 and 8 times 1 is 8 so the highest ad rank gets
the highest position so far so good. Now we need to work out or Google needs to
work out how much the top-ranked advertiser is going to pay the second
ranked third and fourth, so here we go back to this formula the ad
rank of the advertiser below you so that is 16 so you put in 16 over there / your
quality score which is 10 so 16 divided by 10 plus 1 pence equals £1.61 and the
same way is going to be worked out for all the other ranked advertisers and this is how advertiser ranked number one is
paying almost half of what the advertiser ranked number two is paying
because of the Quality Score. So I hope you understand how Google calculates
your price or your cost per click if you enjoyed this video please don’t forget
to subscribe comment share or like and I look forward to seeing you in the next
one bye for now

4 thoughts on “Google Adwords: CPC Calculator

  1. Thanks! Just one Question, Does the overall quality score get affected by the quality score of the website (Response time, SEO, Content quality etc) and Ad copy content (Relevance, Landing Page etc) or not?

  2. Great video Uzair, I presume achieving a high quality score is related to the persons search term versus the relevancy of your ad content and the keywords that match?

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