How does the ad auction work?

In advertising, the auction is a process that happens in Google search to decide which ads will appear for that specific search and in which order those ads will show on the page (or whether or not any ads will show at all).

• Each time an ad is eligible to appear for a search, it goes through the ad auction. The auction determines whether or not the ad actually shows and in which ad position it will show on the page.
• Here’s how the auction works:
  1. When someone searches, the Google Ads system finds all ads whose keywords match that search.
  2. From those ads, the system ignores any that aren’t eligible, like ads that target a different country or are disapproved based on a policy violation.
  3. Of the remaining ads, only those with a sufficiently high Ad Rank may show. Ad Rank is a combination of your bid, ad quality, the Ad Rank thresholds, the context of the person’s search, and the expected impact of extensions and other ad formats.

• The most important thing to remember is that even if your competition bids higher than you, you can still win a higher position — at a lower price — with highly relevant keywords and ads.
• Since the auction process is repeated for every search on Google, each auction can have potentially different results depending on the competition at that moment. Therefore it’s normal for you to see some fluctuation in your ad’s position on the page and in whether or not your ad shows at all.

How does Google determine when to show your ad?

There are 5 main factors that Google uses in the ad auction to determine which ads appear and in what order:

1. Budget/bid – how much budget do you have for the day? Are there are bid adjustments relevant to this search query?
2. Ad relevance – is your ad relevant to the search query?
3. Expected impact of assets (ad extensions) – do the assets help answer the search query better than competitors?
4. Ad rank – how does your ad compare to competitors?
5. Ad context – with the ad auction, context matters. Keep reading to learn more.

When calculating Ad Rank, Google looks at the search terms the person has entered, the person’s location at the time of the search, the type of device they’re using (for example, mobile or desktop), the time of the search, the nature of the search terms, other ads and search results that show on the page, and other user signals and attributes.

The geographic targeting is part of the context of the ad. By including zip codes alongside radii, we are telling Google that these zip codes are relevant to our business, which is a factor in the auction. Additionally, by targeting zip codes, we also cover geographic areas that would have been excluded if we only used radii as seen in the example below:

For more info on geo-targeting best practices, check out this article.

How does Google decide which geo-target to use?

If a user’s location falls within the overlap of two or more geographic targets, Google Ads will use the target with the highest bid adjustment or bid multiplier. For example, if you have a zip code overlapping a radius with bid adjustments of +10% and +20% respectively, and a user’s location falls within the overlap of both targets, Google Ads will use the target with the +20% bid adjustment. If there are multiple targets with the same bid adjustment or bid multiplier, Google Ads will use the target with the highest population density.