Formula to Calculate Google Adwords Ad Rank and Actual CPC

As a search engine marketing professional, from novice advertisers to professional Internet marketers, everyone want their ads to be placed at the top position before the organic results in order to grab the attention from visitors and their customers. There might be chances of getting best Return on Investment (ROI), when your ads are placed at the right position with good adtext.

Do you know how the ads are positioned on content and search networks? Yes of course it is based on their Ad Rank. The highest Ad Rank of Ads will appear in the first position, and so on down the page.
Ad rank is nothing but the position of keyword targeted ads in search and content pages. Here we are going to see how Google determines Ad Rank as well as each advertiser’s actual cost per click.

AdRank:

AdRank = Max. CPC x Quality Score

AdRank is measured by multiplying the maximum cost per click bid that the advertiser is willing to pay by the Quality Score of that advertisers keyword. Ad position is then calculated by the advertiser’s AdRank. According to that advertisers ad will be positioned on highest or lowest position in Google search and content networks.

Advertiser	Max CPC	Quality Score	Ad rank	Position
Advertiser A	$0.40	6	$0.40 x 6 = 2.4	1
Advertiser B	$0.35	5	$0.35 x 5 = 1.8	2
Advertiser C	$0.80	2	$0.80 x 2 = 1.6	3
Advertiser D	$1.00	1	$1.00 x 1= 1	4
Advertiser E	$0.05	5	$0.05 x 5 = .3	5
Advertiser F	$0.10	2	$0.10 x 3 = .2	6

From the above example you can find that, in spite of Advertiser D is bidding well while comparing all of his competitors his ads will show in the 4th position due to his low Quality Score.

Determining Actual CPC:

Actual CPC = (AdRank to hit /Quality Score of Advertiser) + $.01

An advertiser’s actual CPC is measured by dividing the AdRank to hit (the AdRank of the competitor below them) by their own Quality Score plus $.01. The least positioned ad will be the minimum price recommended by Google to display on the Adwords page.

Advertiser	Max CPC	Quality Score	Ad rank	Position	Actual CPC
Advertiser A	$0.40	6	$0.40 x 6 = 2.4	1	(1.8/6) + $.01 = $0.31
Advertiser B	$0.35	5	$0.35 x 5 = 1.8	2	(1.6/5) + $.01 = $0.33
Advertiser C	$0.80	2	$0.80 x 2 = 1.6	3	(1/2) + $.01 = $0.51
Advertiser D	$1.00	1	$1.00 x 1= 1	4	(0.3/1) + $.01 = $0.31
Advertiser E	$0.05	5	$0.05 x 5 = .3	5	(0.2/5) + $.01 = $0.05
Advertiser F	$0.10	2	$0.10 x 3 = .2	6	Minimum Bid

From the above example you can find that, since the quality score of Advertiser C is very low, he needs to pay more amounts to beat Advertiser E.

The quality score speaks a lot in this. From the below example you can find the value of quality score. By increasing the quality score, the ad rank will also automatically increase to hit the top positions. In the below table, Advertiser B has increased their Quality score and check how his rank get increased to hit the top position.

Advertiser	Max CPC	Quality Score	Ad rank	Position	Actual CPC
Advertiser A	$0.40	6	$0.40 x 6 = 2.4	2	(3.2/6) + $.01 = $0.54
Advertiser B	$0.35	9	$0.35 x 9 = 3.2	1	(1.6/9) + $.01 = $0.19
Advertiser C	$0.80	2	$0.80 x 2 = 1.6	3	(1/2) + $.01 = $0.51
Advertiser D	$1.00	1	$1.00 x 1= 1	4	(0.3/1) + $.01 = $0.31
Advertiser E	$0.05	5	$0.05 x 5 = .3	5	(0.2/5) + $.01 = $0.05
Advertiser F	$0.10	2	$0.10 x 3 = .2	6	Minimum Bid

Quality Score is the good way to reach the desired top positions and reduce your costs. To become a Adwords star and to have a success with Adwords, you must improve your CTR, the relevance of your Ads, quality of your landing pages and the speed of the landing pages.