How Are Pay Per Click Advertising Rates Calculated?

by Figaro Digital

Okay, so you probably know that pay per click advertising rates are greatly influenced by keyword bids, but here are a few other factors that will affect your spend:

Your Quality Score

Quality score has a huge influence on your pay per click spend. The benefits of a good quality score include your ads ranking higher in SERPs for lower CPCs. On the flip side, a poor quality score could mean you need to increase bids and spend more money to gain the same position.

Need to improve yours? Figaro Digital partner Liberty Marketing has an in-depth guide to quality scores – read it here.

Your Ad’s Relevance and CTR

The click-through rates (CTRs) your campaigns achieve are a key indicator of how relevant your content is for specific search terms. And with user experience one of Google’s core goals, the more relevant the better.

So, making your ad copy relevant will ensure a decent CTR, which will improve your quality score, boost your ad rank and bring down the cost-per-click of your ad.

Your Ad Rank

As briefly mentioned above, ad rank plays a part in this chain of events. In short, this is a number which is used to calculate an ads position, something that has an influence on CTRs and pay per click advertising rates as a result.

Competition in the Marketplace

A bidding war can push prices up massively; therefore the more competitors there are bidding on the same keyword terms, the greater the price of an ad will likely be.

Of course, the number of competitors will vary throughout the year. For example, it is likely to be saturated in the run up to Black Friday and Christmas when the most retail sales are done. So it may be beneficial to examine seasonality which could advise your bidding strategy.

Your Overall Budget

Every PPC campaign will have a set budget and, although this does not directly influence how rates are calculated, this will influence the overall spend and success of your campaigns.

Whether this is a daily, weekly or monthly limit, the level this is at will influence how your money is spent and on which terms. It’s all about balance: minimising costs to maximise ROI, but at the same time ensuring you have enough budget and flexibility to meet your goals.

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