How Google AdWorks Works May Surprise You!!
https://adwords.google.com/home/how-it-works/new-adwords/#?modal_active=none
This link leads to the explanatory page of Google’s AdWords, Google’s hub for advertisers. AdWords is an easy way to manage one’s advertising accounts, manage account budgets, and see account statistics. Google is a major hub for advertisers as it is a major search engine as well as the parent company for YouTube and Android operation system. With a major part of the world searching, watching, downloading, and playing, there are so many opportunities for ads to be seen by a vast variety of audiences.
Although the prospect of easy management is great, the statistics is probably the most important. With this information, advertisers are able to see what other competitors have paid for their ad spots as well as how well each ad spot is doing in terms of CTR. Assuming that Google is capable of seeing what each advertiser bids, true value or not, then we have a matching market. However, the procedure for determining the price is not exactly the GSD procedure learned in the class. This other link below explains essentially how google determines how much an advertisement will cost per click.
http://www.wordstream.com/blog/ws/2015/05/21/how-much-does-adwords-cost
Going back to GSD, although the price of an ad for advertiser A is closely related to the bid of the advertiser directly below A, it is different roughly by a ratio of the quality score of their ad over the quality score of A’s ad. This allows the price for A’s ad to drop if it is better than that of its competitor. Google’s pricing system allows a new advertiser to out ad rank its seniority by making its ad more relevant for the user and having a better ad website without needing to bid more. Yet it still does reward those who have been with Google for a long time, encouraging business with Google. In itself, this brilliant system of ad rank incentivizes advertisers to make relevant and quality ads, improving the quality of ads over time.