How Google’s algorithm works and what you need to know

Francesco Noli

Francesco Noli

Founder Adsvanced Performance Agency - Advertising Expert

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How Google’s algorithm works and what you need to know

In this article we will see what Ad Rank is, how it works, and how to leverage it to become the top result. We will learn about the two components of the algorithm and how to handle Quality Score.

Google Ads is an auction.

It is important to understand that Google Ads works by auction. Indeed, there will be so many companies that will want to appear as the first result when someone searches for keywords inherent to their business.

Whoever wins the auction will be displayed as the first result in the search ads.

With auctions, Google ensures that you can compete even with large companies.


This is not a normal auction, in fact the person who bids the most does not always win, but the person with the best AdRank wins.

The two decisive factors that determine AdRank are:

  • CPC max
  • Quality Score

The max CPC is the maximum cost per click, which is your auction bid. How much are you willing to spend for a user click? In short, it depends on your bidding strategy, budget and maximum bid. This factor, however, is not entirely decisive.

The QS is a score from 1 to 10 that rates the quality of your ads (or rather the quality of your ads based on your kw).

This is because Google wants people to continue to use Google, incentivizing accounts to create well-crafted ads that are in line with users’ search and therefore do not disrupt the user experience.

The AdRank Formula

How is lAdRank determined? Whoever has it highest will win the auction, so let’s see how it is calculated.

AdRank = CPC max * QS (cost per click max * Quality Score)

Let’s take an example:

You are a physical therapist in Rome and you are willing to offer maximum 3€ per click (CPC MAX= 3€) and you have a QS of 8 leading you to have an AdRank of 24. Your direct competitor entered 4€ per click (CPC MAX= 4€) but has a QS of 4 bringing it to have an AdRank of 16. In this case, even if your CPC is significantly lower than his, you will outperform your competitor by coming out as first in the search ad.

Cost per effective click

The actual cost per click is the cost you will actually pay per click, not the max CPC. The formula for calculating it is:

Effective CPC = (AdRankCompetitor / QS) + 0.01€.

Let us try to calculate the actual CPC with the above example.

You have a max CPC of 3€ with a QS of 8 and a total AdRank of 24. Your competitor’s max CPC is 4€ with a QS of 4 and an AdRank of 16.

Your actual CPC is 2.01€, or 16/8 (AdRank Competitor / your QS) + 0.01€. Your competitor’s, having a lower QS, will surely have a higher effective CPC than yours.

Why QS is important

Having a high QS allows you to win more auctions and have more impressions. More impressions means more clicks. More clicks means more conversions.

Also, the higher your QS, the lower the effective CPC. So you have more clicks for the same budget and, consequently, more conversions.

The higher the QS, the higher your AdRank. So you will appear in better positions in search ads. You will therefore have a higher CTR (Click Through Rate = % of people who click), thus more conversions.

In short, the higher your QS is, the more conversions you will have.

QS does not evaluate ad quality, but it does evaluate ad quality in relation to keywords.

Each keyword will have its own QS. The same ad could have a high QS with respect to a certain kw and a low QS with respect to another.

This happens because the relevance between the ad and kw is one of the most important elements for QS.

How to evaluate the Quality Score

Qs is definable as good when it is above 6.

If for certain keywords your Quality Score is below 6 consider making adjustments. You could exclude the kw, edit the ad, create a new ad ad ad, etc.

How to see the Quality Score

Choose a campaign from your Google Ads account and go to the “Keywords” tab and then to the “search network keywords” tab. You will see all the data for the keywords you have chosen, especially the “Quality Score,” or Quality Score.

If it will not be visible click the “edit columns” button in the upper right and add the “Quality Score” column.

What does the QS depend on?

The first factor on which Quality Score depends is your account history. The more relevant your ads have been over time with keywords searched by users, the better your Quality Score will be.

The second factor is CTR, which is the percentage of users who click on the ad.

Some tips for improving CTR:

  • Make the ad relevant to the keywords
  • Intrigue users
  • Insert a CTA

Some tips to improve relevance:

  • Make the ad similar to queries
  • Enter the main keyword in the title
  • Create different ads for different keywords

The last element that impacts Quality Score is theexperience on the site.

It is important that users, once they click on your ad, land on a site whose experience is pleasant.

Both site relevance and user experience (bounce rate, etc.) are considered to evaluate the experience on the site. The site has DOUBLE impact: on both Quality Score and Conversion Rate.

Some tips to improve the experience:

  • Enter keywords into the site
  • Make the site relevant to query and ad
  • Speed up the site
  • Use https
  • Make the site mobile friendly
  • Use landing page
  • Place CTA, reviews, list of benefits on the site.

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