This Online Auction Drives Real Traffic

In the midst of one of the country’s worst economic downturns in the past 100 years, small businesses are looking for ways to see as much ROI as possible. Good news, Google can help.

Have you ever wondered why some website ads on search engine side-bars are higher than others? Well, there’s a logical, yet very sophisticated reason. It all began with the simple theory of using an auction to drive traffic and revenue. I am talking, of course, about Adwords, Google’s distinct method of online advertising. It’s the world’s fastest auction, with bids occurring tens of millions of times per day.

So, how does it work? If you decide that you want to advertise on Google to help drive traffic to your site, how do you determine how much to bid for one of the top ad spots? If your bid is too low it might not garner much attention; if it’s too high, you might waste a bunch money…right? Fortunately, Google automates the process quite nicely.

As an accountant in Ankeny, Iowa, Tom wants to bid on the phrase “Des Moines Accountants”. Let’s say $2.00 is what Tom is willing to bid on this phrase, while another accountant bids $0.99, and yet another company bids $0.75 (all on the same phrase). To avoid advertisers having to pay more than what is necessary to win the bid, Google charges each advertiser just one penny more than then next-highest bidder. Therefore, Tom would pay no more than $1.00 per click even though he bid $2.00.

In the industry, this auction is often referred to as pay-per-click advertising. In addition to deciding how much to bid per click, advertisers also decide how much they are willing to spend each day/month on their entire ad campaign. So, Tom can decide that he only wants to spend no more than $200 per month utilizing pay-per-click advertising.

At the same time, the auction itself is only part of determining where an advertisement ranks. The other major factor is what is called the “quality score”, which is determined by (1) keywords, (2) the quality of the web page where the ad is linked, (3) the relevance of the ad in relation to the keyword being searched, and (4) the percentage of times users actually click on a given ad from the results page.

So, lets’ say Tom decides to bid on the phrase “Chicago Accountant” and we’ll assume that his bid is the highest. Even so, his ad may be positioned lower than ads from accountants near Chicago, Illinois since their location is more relevant to what people are searching.

Once someone clicks on an ad and he/she lands on a webpage, it is crucial that the page and website are user friendly. They need to be easy to navigate, have relevant content, and have obvious titles and subtitles for searching. All of these will help improve conversions and sales. The faster and easier it is to find a product, the more likely a customer is to purchase it. Therefore, making sure the landing page is fully functional with plenty of good content is just as important as getting an advertisement noticed.

Whether you’re looking for a way to improve traffic to your website, profits for your business, or you simply want to learn how Google determines which ads go where, you must admit, it’s a fantastically unique and efficient process that helps businesses and consumers worldwide.