When you're the person laying out the cash yourself and it's your own business, your own risk, and your own credit card that Google is dinging every month, you don't have time for your own ego stroking. Your customers don't have the patience for it either. Nowhere is this more clear than in Google AdWords management. Putting your own money on the line has a funny way of wising us up to what gets clicks and what doesn't.



Google Will Reward Your Relevance

If you bid higher for clicks you can get a higher position on the search pages. However, as your click-through-rate increases, Google will reward you by giving you a better position on the search pages. That is to say they reward you for relevance.

Roughly speaking, the first position has always been given to the highest bidder. But Google has long maintained an ingenious little twist. Here's a simplified version of its formula:

Your Relative Position = Your Bid Price x Your Clickthrough Rate

To explain more exactly, the formula takes your bid price and multiplies it by your Quality Score. Either way you do it besides your bid price your click through rate has the greatest impact on your position.

What click through rate are we talking about here? It could be your ad group click through rate, or either the click through rate of your ads for search partners or AdSense, but that is not what we are talking about here. We are talking about the click through rate of your individual keywords and their Google performance alone.

If you are getting a good CTR, you won't be required to have as high a bid for a good position. It works like this; I bid one dollar and the ad gets a click through rate of one percent, and your ad gets a click through rate of two percent. You will be able to get about the same position as I do with only a bid of 50 cents. With a 51 cent bid you will get a higher position than I have. Say you already have top position, Google will charge you a lower bid price as your click through rate improves, without you having to do anything. Nice!

It may seem like some magic formula but it's not. What it means to you is that you are paying out less money to Google each month and that is money in the bank!