When a user performs a search, an ad auction is held. This auction determines the following:
The right of an advertising account to participate.
The order in which the ads will appear in the ad slots.
How much will a click cost for each of the advertisers.
The first factor influencing the auction here is the maximum CPC (cost per click) that is set by the advertiser in his advertising account for a particular keyword or ad group. But this does not mean that this is how much the advertiser will pay per click, just the maximum.
Another influential factor is the Quality Score (QS) of the ad. It is formed by a number of different factors: the expected CTR (click through rate) of the ad, the relevance of the ad to the search query as well as the quality and relevance of the landing page that the ad will send traffic to.
As a result, the ad position on the site is determined by ad rank, which can be defined in simple words as: Ad rank = quality score X maximum CPC
The actual Google formula is a little more complicated, but for general understanding it is a great way to look at it.
Why use contextual advertising?
Here are some reasons why contextual advertising might be suitable for you:
You can start getting clicks very quickly. Once you’ve set up your ad account and created ads they usually need to be approved by the platform and this takes no more than a few hours. Ads can also be blocked if the advertiser violates the principles of the platform.
PPC can be easily measured and tracked. All popular platforms such as Google Ads and Bing Ads allow you to track conversions including the cost of orders or leads. They also allow you to see at a detailed level the ROI (return on investment) not only for your entire account but also for specific ad groups and keywords.
You have full control over when ads are shown and how much you pay. You have full control over the timing of your ads (including time of day and day of the week) and can easily turn ads on and off as you wish; although it is always a good idea to use an effective campaign to drive broader business growth rather than using it as a stop-start tactic.
You can perfectly target your customers. Unlike traditional advertising, contextual advertising allows you to target a specific customer. You can use this information to reduce your advertising costs.
Multiple ad formats available. Pay Per Click includes several different ad formats and these can be used to achieve success for specific businesses and use cases.