goldfire — 2011-06-14T12:19:35-04:00 — #1
So I understand that Google has a quality score for each ad and each keyword, and that they use the following formula to determine the cost of each ad.
P = (B2 * Q2) / Q1
Where B2 is the bid of the next lowest ad, and Q2 is the quality of that ad.
What I don't understand is how they rotate the ads on the Google Network and how this affects pricing. Obviously they use a weighting mechanism to show the ads with a higher ad rank (bid * quality score) more often, but if an ad gets shown that doesn't have the highest ad rank, do they pay the CPC that the top ad would have paid, or do they pay their lower rate?
It seems odd that they would pay the lower rate since it is modeled after an auction and technically there would be higher bids that aren't winning.
dastarbug — 2011-06-16T10:30:18-04:00 — #2
Check out the video number 7 & 8 about the Ad Auction here: Google AdSense optimization techniques video series
goldfire — 2011-06-16T14:16:02-04:00 — #3
Thanks, video number 7 is helpful, but I still don't understand the rotation. If the auction happens just like explained in that video, users would almost never see the banner on a specific site change during a visit. Since the advertiser's ad rank is unlikely to change dramatically during a single visit, that same advertiser will keep winning the auctions for each impression. However, this obviously isn't the case since the ad shown usually change for each new impression.
So in the video he gave the example of advertiser's A & B. Advertiser A had an ad rank of 24, while B had an ad rank of 21. This means that advertiser A pays $1.76/click and wins the auction. If in this same scenario advertiser B's ad gets shown instead of advertiser A, do they also pay the winning bid of $1.76, or do they just pay the minimum CPC?
If I am looking at this wrong and only the ad with the highest ad rank wins the auction and gets shown, then how does Google prevent users from seeing the same ad over and over on a visit to a particular site?
dastarbug — 2011-06-16T16:46:41-04:00 — #4
Why are you interested in this?
If you really want to dig deeper you could start with the adsense patents because I am 100% sure that "P = (B2 * Q2) / Q1" is a very very very very oversimplified formula to help people understand the basics.
I bet that the algorithm behind AdSense is so complicated that you need to study math and computer science to fully understand it. Besides from it being top secret.
Anyways you might don't see the same advertiser all the time because of pages containing more then one keyword, limited budgets for advertisers, a rotating algorithm for auction winners, your smart pricing values, and and and.
Besides not every page gets the highest bidder by the way otherwise people bidding a few cents per click would never be delivered.
goldfire — 2011-06-16T17:42:03-04:00 — #5
Well I'm not looking to get that technical with it. I'm just trying to understand it from a high level. Yes, different pages have different keywords, but what about when you are on the same page and just refresh the page. Usually you will see a different banner. It obviously isn't the case that the ad you saw just a few seconds earlier has run out of funds. One of these two ads obviously has a higher ad rank, just one has a higher probability of showing than the other.
I guess I'll just assume (since there doesn't appear to be any public information about this) they pay what they would from the formula (which, yes of course is way over simplified), and an ad that would pay more for the click just happens to not show sometimes.
dastarbug — 2011-06-16T20:13:43-04:00 — #6
Do you think that Google only picks one keywords per page to trigger ads?
Each click on an Ad is a vote for the Ad relevance, which will be taken into account as well. Also there is interest based advertising and of course a build in rotation so each advertiser gets its ads shown. This is not a simple auction where the highest bidder gets the goods
You should really spend more time working on optimizing your website for AdSense then trying to understand the algorithms of AdSense.
AdSense is a black box and most publishers know that
goldfire — 2011-06-16T20:27:10-04:00 — #7
I never said it was a simple auction where the highest bidder winds, I'm pretty sure I demonstrated that understanding when referencing ad rank and its calculation by QS * max bid.
I am not an AdSense publisher. I'm simply trying to understand the system better out of pure curiosity.