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Here’s how Google’s own ads impact bids & pricing in AdWords auctions | Top Seo Soft

Google and its sibling companies at Alphabet collectively bid on thousands of keywords in AdWords. That has been going on for years. The search giant has said its ad buying does not “directly inflate” pricing for other advertisers because “advertisers are charged as if it wasn’t bidding.” However, that’s not quite accurate.

Participating in its own ad auctions has long raised conflict of interest objections. A report from The Wall Street Journal last month put a spotlight on the practice again with some eye-popping stats and renewed our questions about how these ads affect other advertisers.

Analysis by SEMrush, in early December, featured in the WSJ report, found that ads for Google and its sister companies appeared in the top ad spot on Google search in 91 percent of 25,000 results for broad non-brand queries — like “laptops” and “phones” — related to the products.

How do all those ads affect the CPCs Google customers pay in those auctions? From the The Wall Sreet Journal (bolding added):

“Google said that when it competes for ads, other advertisers are charged as if it wasn’t bidding, meaning its participation doesn’t directly inflate prices. That is one of a series of house ad rules set by an internal Google committee designed to minimize conflict.”

Let’s break that down and look at why that first sentence doesn’t paint the whole picture.

How Google deals with pricing when it competes
The committee overseeing Google’s house ad rules determined that when a Google ad competes in an auction, the AdRank of its ads will be taken out of the mix before calculating the CPCs of the other advertisers. That’s what “advertisers are charged as if it wasn’t bidding” refers to.

What it really means is advertisers are charged as if Google didn’t win its ad position.

First, a quick refresher. AdRank is the quality score of an ad times the maximum price an advertiser is willing to pay for an ad click. AdRank is what informs the price an advertiser pays for an ad click. The basic CPC calculation is:

AdRank of Advertiser Below You/Your Quality Score + $0.01 = Your CPC

Because pricing is based in part on the AdRank of the next competitor, actual prices can vary pretty widely. A typical auction looks something like this:

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Top Seo Soft | Here’s how Google’s own ads impact bids & pricing in AdWords auctions – Top Seo Soft.

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