By now, you probably know that search engine marketing is a great way to advertise to people at just the right moment - when they’re looking for your products or services. But do you know how it actually works?
Search engine marketing is based on an auction system. So in this video, we’ll discuss how the auction works, and look at an example to help you figure out how to use SEM in the best way for your business.
Let’s start with a search for a common service—say, wedding photography. Take a look at the results page.
In the centre you’ll see organic listings - listings that weren’t paid for. And at the top and down the right column you’ll see the paid ads.
Search engines limit the number of slots adverts can appear in on an individual page. Advertisers then compete in an auction for those slots.
So, after you search for wedding photography, you see the outcome of the auction. The adverts that “win” appear in more desirable slots on the results page - usually that means near the top. The “runners-up” appear in lower slots.
Alright, you’re probably wondering: how does the auction work? Well, like most auctions, you place a bid, which influences your performance in the auction. But it’s not all about your bid. In this auction, the relevance of your adverts is crucial as well. So, success in the auction means having a competitive bid, as well as strong relevance. Getting both of these right is the recipe for success in SEM .
Let’s look at both of these factors, starting with the bids in the auction. Say you’re willing to pay up to $5 when people click on your ad after searching for wedding photography. This price is often called your maximum cost per click, or Max CPC. If your competitor’s only got a Max CPC of, let’s say, $2, you’ll have a higher bid, meaning you’ll be “ahead” in the auction. Keep in mind: businesses can change their Max CPCs at any time, so you’ll need to keep an eye on your bids regularly to ensure you’re getting the performance you want.
But as mentioned earlier, there’s more to the auction than just the bids.
The other big factor is relevance. This is a measure—normally rated from 1 to 10—of how closely your ad relates to what a person searched for. Search engines such as Google and Bing refer to this as your Quality Score .
For example, if someone searches for wedding photography, and your ad’s headline is Wedding Photography in Melbourne, the search engine probably considers your ad highly relevant. That means you’d likely get a high Quality Score .
But what if your advert’s headline is Wedding Services Melbourne? Both adverts refer to weddings, but this one is less relevant, because it’s talking about wedding services instead of wedding photography. In this case, your relevance wouldn’t be as good, so you’d probably have a lower Quality Score .
Think of it this way. When two competing businesses have equal bid prices, the business with a higher Quality Score will appear higher on the search results page. One of the best ways you can improve your performance in SEM is to consistently review your campaigns to find ways to become more relevant.
With us so far? The price you’re willing to pay for a click — the max CPC — and your Quality Score are the main things that determine your performance in the auction.
Now, let’s push our example scenario one step further.
Say two different businesses compete on the same keyword: wedding photography.
Richard bids $4, but his advert is deemed not very relevant, a 3 out of 10. Claire bids $3, and her relevance is a full 10. If we look closely, we can take all this info and figure out what will happen in the auction.
Multiplied out, Richard’s auction score - called ad rank - is 12. Claire scores an impressive 30, even with a lower Max CPC.
So what does that mean? Although her bid was a dollar less than Richard’s, Claire’s advert wins the auction, and she gets a higher position on the page than Richard.
And that pretty much covers SEM Auctions. As you can see, you can’t simply “buy your way to the top.” This is to ensure the most relevant adverts win the auction, not simply the ones with the highest bids. If your ads lack relevance and get a low Quality Score , it’ll be difficult to compete. In fact, if relevance is too low, the search engines may not display your ads at all.
To improve your performance, stay focused on improving the relevance of all your adverts. Make sure that your adverts always closely match the terms that people have just searched for. By doing this, you can win better positions for your ads, without having to pay more money.
When advertisers compete to show ads on the same search results page, search engines use an auction to determine which ads appear and in what order. But there’s more to consider than just the price. In this video, we’ll talk through:
- how an SEM auction works
- factors that influence the outcome
- a detailed example.