This is a question about PPC advertising that many people ask. “What, Exactly, Determines Your PPC Keyword Price?” Some people expect that Google or other search engines that you use have something to do with that. However, most experienced advertisers know that search engines don’t affect the keyword price.
The term keyword price is ok to describe how much we pay for each click, but the most known term for this action is the cost per click (CPC). We will use many times this term below.
The factors that determine the cost per click (CPC) on each keyword are the keyword competition, your bidding strategy, your quality score, and other factors that have to do with your or other advertisers.
Your Keyword Bids
The first important factor is your keyword bids. Google Ads, Bing Ads, and the other known advertising programs of search engines will not exceed your maximum CPC. Depending on the competition and other ranking factors, your keyword price will be lower or equal to your maximum CPC.
If you set a low bid, you will get low-valued clicks. If Google thinks that it is too low, your ad will not appear on the search page. However, a high bid will keep increasing to make sure your ads get enough views.
Google Ads uses the Quality Score to determine the relevancy of your ads with the targetted keywords. Other search engines use different scores and ways to figure out the same thing. Your ads need to have a good quality score if you want to have a lower keyword price.
The simplest way to explain the Quality Score is by simplifying how it works. If the Quality Score is high, your ads will get higher positions, and your CPC will be lower. When the Quality Score is low, your rankings suffer, and the CPC becomes more expensive.
Google Ads considers the advertisers’ quality Score to figure out the first page thresholds and ad rankings. Quality scores can improve click-through rates because people click ads based on their position as well. The ads on the first places get more clicks from the users, and this is why they are more valuable.
If you want to improve the Quality Score, you should care about targeting the right keywords. When you target a keyword that does not generate clicks to your ads, your Quality Score will go down. The landing page can help your chances for a better score as well. Google Ads tries to understand if users find what they search.
Click-Through Rate (CTR)
Click-through rate is one of the metrics that affect the quality Score because it shows on Google if your ad copy is relevant to the topic. But does the click-through determine the keyword price?
The answer is that it can affect it by changing the quality Score. As mentioned above, a better quality score means a higher position on the search page and more clicks. Of course, this is a good thing because you can improve the click-through rate by making a few changes to the ad’s viewable parts.
You will get a higher click-through rate when your ad is interesting. The title of the ad, the description, and the link are the only viewable parts. If they can get the attention of the user with these details, they will click on your ad.
When they type a particulate keyword on Google, they expect to get results that include this keyword. The landing page that you will send these users must include similar keywords as well.
Another way to increase the click-through rate is by adding Google Ads extensions. They can add more viewable parts to the ad and make it more interesting for users. The extensions can include an address, phone number, price, reviews, and many more.
Ad Rank is a number and not an actual ranking that is used to calculate your ad position on the search page. The formula for the Ad Rank is the following:
Quality Score x Maximum CPC = Ad Rank
However, it is not the only factor determining the keyword price, even if it is an important one. The Quality Score is part of the Ad Rank formula, so you can only control the parts that affect the Quality Score, but we mention it as another metric that affects the keyword price.
There is competition in all the niches, and people will keep bidding for their most profitable keywords. We can’t avoid or control it. When strong competitors get into new keywords, all the rankings of the advertisers will change.
For example, if a new competitor has a better quality score than you, your rankings will go down. So, your click-through rate will decrease, and the CPC increase. Competition is a part of the process of PPC advertising and definitely will change the CPC in every keyword.
You may not expect that seasonality affects your CPC, but it is huge in PPC advertising. There are dates that every business has higher conversion rates as Christmas or Black Friday. Google Ads don’t increase CPC because of the season, but there is higher competition these days.
Companies that are not active the other days of the year may decide to bid for your keywords. Some of the regular advertisers may increase their CPC to get higher rankings. Usually, you can expect both scenarios on Christmas and Black Friday. If you want to be competitive for these periods and not lose your good rankings, you must set a higher maximum CPC.
Hopefully, you have the answer that you want for the question of this post. Many things determine the keyword price. The maximum CPC is always an important factor, but you can count on the Quality Score, click-through rate, and the competition.
The good news is that you can control all these metrics except for the competition. However, if you want to bid for buying keywords in your niche, you have to face and win the competitors as well.