One of the things that distinguishes Google is their advanced ranking algorithm for pay per click ads. Most pay per click (a.k.a. PPC) search engines use a simple “the more you pay, the higher you get” ranking algorithm. The highest bidders are ranked the highest, with the other ads ranked in decending order based on their bids.

The Google Adwords ranking algorithm is more complicated. Their primary ranking method uses AdRank. Each ad is assigned an AdRank for each keyword it runs under. The AdRank used to be determined by multiplying the ads maximum bid times the click through rate the ad gets. So, if you set your bid for thirty cents, and your ad had a 1.5 percent click through rate, your AdRank was 45.

Recently Google has introduced other factors in ranking the ads. They now determine your AdRank by multiplying your bid times your ads “quality score”.

Google says that “The Quality Score is determined by the keyword's performance history on Google: its clickthrough rate (CTR), relevance of ad text, historical keyword performance, landing page quality, and other relevancy factors.”

Google doesn't give a lot of information on these other factors, but we do know some about them.

As far as the relevance of the ad text, you should put the keyword (when possible) into the title and description. Be sure to write your ads for users, though, not for computers!

Google does not reveal how they measure landing page quality, but I would assume they measure the time a visitor remains on your site before clicking back to the search results. Just make your landing page a top-quality, information filled and / or high converting page and you should be fine.