The AdRank Formula

AdWords is based on an auction system. The auction begins when a user submits a search query. Google then checks if the query contains keywords that advertisers are currently bidding on. If yes, then Google will use the AdRank formula to determine which ad will be displayed and its placement.

Ad Rank = CPC Bid x Quality Score

Using this formula, the best combined CPC bid and Quality Score gets your ad a better position.

In other words, advertisers with low quality scores will need to increase their CPC bid to get optimum ad placement. 

What is Quality Score?

In simplest terms, Quality Score is a metric that determines how relevant and useful your ad is to the users. It takes into account the relevance of your keyword(s), click-through rate (how many users actually clicked on your ad), relevance of your ad text, and the quality of your landing page. Google may consider your historical AdWords account performance.

The benefits of having a high Quality Score includes better ad positions and lower costs-per-clicks

Unfortunately, no one outside Google knows exactly how much of each factor weighs in the Quality Score algorithm. But using common sense, we can say that the click-through-rate is probably the most important component – the more people click on your ad, the stronger it indicates that your ad is relevant and helpful.

You will find the 1-to-10 Quality Score metric in your AdWords account as well as your performance on three components:

  1. Expected click-through rate – the likelihood that your ad will be clicked
  2. Ad relevance – how closely your ad matches the intent behind a user’s search
  3. Landing page experience – how relevant, transparent and easy-to-navigate your page is for users.

Each component has a status of above average, average, or below average.

For example, say your ad has an above average in expected click-through rate, but a below average in landing page experience. It means while users find your ad text compelling, but they are having a hard time finding what they need on your website. This is a good indication that you need to work on improving your landing page.

Quality Scores affects your CPC

A high Quality Score means that your ad is meeting users’ needs. Google likes that and will reward you with lower CPCs.

Take the AdRank Formula:

Ad Rank = CPC Bid x Quality Score

In other words, your CPC is  Ad Rank divided by Quality Score.

But, instead of using your ad rank, Google uses the ad rank of the next highest ad below you. 

So, your actual CPC is calculated by:

Actual CPC = the Ad Rank of the advertiser below you / your quality score + $0.01

For example, say you have set your maximum CPC bid at $2.00 and you have a Quality Score of 9. Your AdRank will then be 18. Now, the advertiser just below you has set his maximum bid at $3.00 and have a Quality Score of 5, giving him an AdRank of 15. Your actual CPC would then be $1.68. In other words, you are paying less than your original $2.00 bid.

The only exception to this formula is when you are the only bidder. In that case, you will simply pay your maximum bid per click.

How does the Quality Score affect your ad’s position?

Based on what we have explained so far, your Quality Score is just as important in determining your ad’s placement as how much you are willing to pay (aka. your CPC).

Let’s look at an example. Say, you and 3 other people are fighting for an ad placement for the keyword “Custom Cookies.” 


 Quality ScoreMax.CPCAd RankAd Position
Advertiser #25$2.00104
Advertiser #38$1.50123
Advertiser #44$4.00162

Using the formula for AdRank, you just edged out the other advertisers for that first ad position, even though Advertiser #4 is willing to spend more per click.

Why is Google making it so difficult?

AdRank and Quality Score are Google’s way of preventing an advertiser with too much money from simply buying out the keyword. This creates a more level playing field for everyone. 

AdRank and Quality Score also allow Google to reward good, relevant, useful ads by offering CPC discounts and better ad placements. 

Ways to improve your Quality Score

Now that we know Quality Score plays an important role in the placement of your ad, you might want to know how you can improve your Quality Score. 

The best way to improve your Quality Score is to focus on improving the 3 components:

Expected Click-Through Rate, Ad Relevance, Landing Page Experience. 

As we’ve mentioned earlier, you can find the performance report on these 3 components within your AdWords account. You will see that each component has a status of above average, average, or below average.

  1. If your Ad Relevance needs to get better, you may want to make sure you ad text is clear and easy-to-understand. You might also want to re-examine your keywords. You need to make sure your ad answers search queries.
  2. If your Expected Click-Through Rate needs to get better, you may want to create more compelling ad text. You might need to highlight your product or service more specifically and experiment with different calls to action.
  3. If your Landing Page Experience needs to get better, you may want to make sure your landing page delivers what a user is looking for. Do not simply dump users onto your homepage and make them navigate around to find the information they are looking for.

You might also need to pay attention to the user’s device. Yes, the user’s device (laptop, table, smartphone, etc.) is taken into account when ad quality is calculated. Make sure your website is optimized for mobile users. You may also want to create mobile-friendly ads specifically to target users on mobile devices.