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Google Advertising

Many search engines such as Google use search advertising as a way to make money. These search engines display certain ads based off what a user searches, as well as a second price auction, which is an auction in which the bidder who bids the highest value wins, and pays the second highest value. Additionally, Google uses Ad Rank, which ranks ads according to variables such as how likely something is to be clicked, “landing-page experience,” how well the add relates to the user’s search, and “ad formats”(clearcode).  In this way, advertisers cannot simply display an add by bidding the highest amount, instead, their likelihood of winning the bid is impacted by these variables. Thus, advertisers can increase their ad rank by abiding to these variables.

These variables are combined into something called the Quality Score. The Quality Score and the advertiser’s monetary bid are combined into one bid for the second price auction. Google uses a second price auction, because the advertisers are incentivised to bid their true value (instead of bidding less), which means that Google will make more money in the long term. 

Some factors that can change the ad rank are seasonal campaigns; weather, holidays, and more can impact the types of ads that are displayed. Ad targeting; which happens when advertisers display ads to people who will most likely click on the ad. It could be based off variables such as interests, race, and gender. Geotargeting, where advertisers target their ads towards certain locations. Additionally, conversion optimizer is a dynamic optimizer that changes bids based off other variables(Google Support). It’s important that Google takes these variables into account because it increases their revenue and their marketability to advertisers, which also increases their revenue.


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October 2019