How are Google Ad Costs Determined?

Many people assume that the the amount a business pays for a click on their ad is simply a matter of them saying they’re willing to spend $X per click. For better or worse (depending on perspective) things are much more complicated and that’s part of the reason why we’ve been so successful at putting our clients ahead of the competition in terms of online ad ROI.

Google factors in a variety of different variables when calculating how ads are ranked and clicks are charged. Remarkably they perform these calculations each time a search is performed!

Some of those factors include:

• How closely related the keyword you’ve bid on is to the person’s search
• How relevant the page the ad leads to (landing page) is to the search
• The percentage of people who historically have clicked on your ad
• The number of additional ‘ad formats’ included with your ad


Here’s a video by Google’s Chief Economist Hal Varian, giving an oversight of how ad ranks and click costs are determined.