Google Ads Bid Floors & Auction Reserve Prices

You've probably heard that the cost per click (CPC) you actually pay in Google Ads is just one penny more than your closest competitor in the ad auction. Well, that's not always the case. It's possible that you could have zero competitors in a particular ad auction in Google Ads, bid an arm and a leg, and still not have the opportunity to have your ad show. One reason why this could be happening is because in Google Ads there's something known as bid floors or auction reserve prices. Whether you think that this is ethical or not, it's very common in general auctions.

one penny more to win ad auction

What Are Reserve Prices in Google Ads?

In simple terms, reserve prices are the minimum bid you need to have for your ad to be eligible to show. What's frustrating is that it doesn't matter if you have 100 competitors or none; if your bid is lower than the reserve price, your ad won't appear. Before even participating in an auction, you must pass Google's ad rank thresholds.

Understanding Ad Rank Thresholds

Ad rank is influenced by several factors including:

  • The quality of your ad

  • The quality of your landing page

  • The context of your ad relative to the user's query

Imagine you're bidding on a luxury car at an auction. You must walk through the auction hall's doors to participate, which is akin to passing Google's ad rank thresholds. Even if you get through the doors, the bid starts at a pre-set minimum ($100,000 in this analogy). You can't bid below this starting price.

Why Are Auction Reserve Prices Important?

Auction reserve prices create a barrier to entry that can help minimize spam advertisers entering the system. For example, keywords like "mesothelioma lawyer" could be overrun very quickly if there were no barriers.

lawyer example in google search

The Issue of Transparency

The main problem with auction reserve prices is the lack of transparency from Google. Imagine you're an HVAC company in a rural area with only one competitor (and you have correct location targeting set up). You might expect to get clicks for $2 but end up having to bid $20 because of the auction reserve price. This lack of transparency can be frustrating and confusing for advertisers.

How Reserve Prices Can Affect Your Campaigns

Sometimes the bid floor you see for your business and industry might be influenced by a related auction, making it even more complicated. For example, if you set a max CPC of $2 and get zero impressions, it may be because there's an auction reserve price you didn't account for.

Strategies to Optimize Your Bid

  1. Research Average CPC: Use tools like Google Keyword Planner to get an estimate.

  2. Adjust Your Max CPC: Increase your max CPC incrementally to see if it meets or exceeds the reserve price.

  3. Quality Score: Improve your ad and landing page quality to boost your ad rank and potentially lower costs.

The Move Towards Automation

While Google is moving towards automation with campaign types like Performance Max, it's uncertain if we will ever understand the specifics of reserve prices and bid floors fully. Understanding why these prices exist would help advertisers make better-informed decisions.

Frequently Asked Questions (FAQs)

What are Bid Floors in Google Ads?

Bid floors, or auction reserve prices, are the minimum bids you need to have for your ad to be eligible for showing.

How Do I Know What the Reserve Price Is?

Google doesn't provide specific information on reserve prices, which is part of the transparency issue.

Can Reserve Prices Fluctuate?

Yes, reserve prices can be influenced by related auctions and other factors external to your specific campaign.

How Can I Improve My Ad Rank?

Improve your ad and landing page quality, and ensure your ad is highly relevant to the user's search query.

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