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SEO (Search Engine Optimization) and Google’s Ad Pricing Strategy


Everyone uses google search. I realized that I use google search more often than I thought, and that I never really thought about the algorithms used to produce the results of my search. This article goes through an overview of how SEO (search engine optimization) companies know what they know about this ranking algorithm. SEO companies are hired by other companies to ensure their website come up as high on the results list as it can for relevant searches. Although Google is fairly secretive about its algorithm, SEO companies can still figure patterns out from Google’s published manuals, guides on small algorithm changes and years of experience tracking trends. With this information, SEO companies figured out the core ranking factors and constantly update their knowledge as Google makes updates.


In class, we learned that relevant ads that come up on searches are auctioned by search engines like Google. What I’m interested in is the relationship between the links that come up as advertisements and the other things that show up because of the ranking algorithm. Does the small “Ad” symbol influence searchers likelihood of clicking an ad link over the normal search links? The way ads are charged is through “pay-per-click”. They come up depending on keyword-based advertising. It would be valuable to know if SEO companies can strategically place keywords on company websites to do as well as the other companies that are paying for ads. Google conducts a generalized second priced auction, in which they don’t actually know the true value of the advertisers. Very similar to a normal second priced auction, each advertiser has their own value per click for the ad slot. “Rounds” are performed until market prices are met and each slot is paired with an advertiser to maximize total valuations. These rounds first initialize all prices to 0. A preferred seller graph is made, and payoffs are computed until there are no constricted sets. In the case that there is one ad slot available, the engine would need to ask the advertisers to re-announce values and sell the slot to the advertiser with the highest announced value and charge this advertiser the harm done to the other advertisers by taking this item. Given that advertisers could lie about their values, there needs to be a clear strategy for companies to best set their public presence in search engines. The optimal SEO company should use this knowledge on Google’s generalized second priced auctions to calculate the potential ad prices for a company, this way they could charge their customers appropriately. A great selling point to hire an SEO company would be to prove it would be cheaper to hire them to get your website to the first Google search page than paying Google for the same ad. These class concepts and the emerging SEO industry are tightly linked and SEO companies should definitely be familiar with Google’s ad pricing system.


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October 2018