When you first start using Google Ads, one of the most confusing parts can be how the bidding and auction system works. You may wonder how Google decides which adverts show up at the top of the search results, why one advertiser pays more than another, or how you can make sure you are not wasting your budget. The good news is that while the system is complex behind the scenes, it can be explained in simple terms and managed effectively with the right approach.

This article will guide you through the basics of bidding, the auction process and how to optimise your campaigns so that you get the best possible return on your investment.

What bidding means in Google Ads

Bidding in Google Ads is the process of telling Google how much you are willing to pay when someone interacts with your advert. In most cases, this means how much you will pay if someone clicks on your advert. The amount you bid does not always equal the amount you pay, but it sets the maximum you are prepared to spend for that click.

There are different bidding strategies available in Google Ads, depending on your goals. For example:

• Manual cost per click (CPC) lets you set the maximum amount you are willing to pay for a click.

• Automated strategies like Maximise Clicks, Target CPA (cost per acquisition) or Target ROAS (return on ad spend) use Google’s machine learning to automatically adjust bids to help you achieve a specific goal.

Choosing the right bidding strategy is important, because it directly affects how much traffic you get, the type of users you reach, and how efficient your ad spend is.

How the auction works

Every time someone searches on Google, an instant auction takes place to decide which adverts appear and in which order. This happens in a fraction of a second.

Here is how it works step by step:

1. A search query is entered – for example, “best running shoes UK”.
2. Google identifies eligible adverts – only ads that target the keywords related to that query and meet policy requirements are considered.
3. The auction begins – Google compares the bids, ad relevance, quality of the landing page and expected impact of ad assets (F.K.A. ad extensions i.e. extra pieces of information like site links or phone numbers).
4. Ad rank is calculated – this is the score Google uses to determine both the position of your ad and how much you actually pay. Ad rank is based on your maximum bid and quality score (a measure of ad quality, relevance and landing page experience).
5. The results appear – the ads with the highest ad rank show up, usually above or below the organic search results.

The key thing to remember is that the highest bidder does not always win. A well written advert with a relevant landing page and a decent bid can beat a higher bidder with a poor quality ad.

Quality score explained

Quality score is a rating Google gives to your keywords and adverts. It is scored out of 10 and is influenced by three main factors:

• Expected click through rate (CTR) – how likely users are to click on your ad.
• Ad relevance – how closely your ad matches the user’s search intent.
• Landing page experience – whether the page people land on is useful, relevant and easy to navigate.

Improving your quality score can reduce your costs because you will pay less per click for the same position. This means that focusing on ad quality is just as important as the amount you bid.

Setting up bidding strategies

When you create a campaign in Google Ads, you will be asked to choose a bidding strategy. Here are some of the common options and how to use them:

1. Manual CPC – best for advanced users who want full control over their bids. You decide the maximum CPC for each keyword. Start small and adjust based on performance.
2. Maximise Clicks – Google automatically tries to get as many clicks as possible within your budget. Good for generating traffic but may not always bring the best quality leads. We often do not recommend this strategy unless your final goal is traffic (not leads/sales).
3. Target CPA – Google aims to bring you conversions (such as purchases or sign ups) at an average cost you set. Best used when you already have conversion tracking in place. Note: we don’t recommend using this option until you have adequate CPA data within your campaigns to set a realistic target that won’t cap your spend!
4. Target ROAS – designed for businesses with sales data. Google focuses on bringing in revenue relative to ad spend. For example, a target ROAS of 400 per cent means you want £4 back for every £1 spent. Note: we don’t recommend using this option until you have adequate ROAS data within your campaigns to set a realistic target that won’t cap your spend!
5. Maximise Conversions (called “maximize” in Google) – This is the most beginner-friendly option that also delivers results. Google automatically bids to get you the most conversions possible for your budget. This works well when you want quick results and have clear conversion tracking.

Best practices for bidding and optimisation

To get the most out of your bidding and the auction system, keep these best practices in mind:

• Start with clear goals – decide if you want more traffic, more leads, more sales or better brand awareness. Your goal determines your bidding strategy.
• Use conversion tracking – always track actions like form submissions, purchases or phone calls. This allows you to measure success properly.
• Test and learn – run small experiments with different bidding strategies to see what works best for your business.
• Focus on quality score – write clear, relevant ads, group your keywords logically and send users to a strong landing page.
• Set sensible budgets – avoid bidding too high at the start. Begin with a budget you are comfortable with and scale up when you see good results.
• Monitor regularly – check your campaigns often. Look for keywords that are spending a lot but not converting, and pause them. Increase bids where performance is strong.
• Use ad assets (F.K.A. ad extensions) – site links, callouts, structured snippets and phone numbers all improve ad rank and increase click through rates.

A simple example

Imagine you own an online shop selling running shoes. You decide to bid on the keyword “buy running shoes UK”.

• Your maximum CPC is £1.50.
• Your advert is well written, matches the search and your landing page shows a range of running shoes with free delivery.
• A competitor bids £2.00, but their advert is vague and leads to a generic homepage.

Even though they bid more, you could win a higher position because your ad rank is stronger due to better ad quality. You might only end up paying £1.10 for a click, not the full £1.50 you set. This is how the system rewards quality and relevance. To read in-depth about Quality Score, learn more in this comprehensive article.

In summary…

Bidding, auction and optimisation in Google Ads can seem complicated at first, but once you understand the basics it becomes much easier to manage. The important things to remember are:

• Your bid is only part of the equation.
• Quality score plays a huge role.
• Choosing the right bidding strategy depends on your business goals.
• Ongoing optimisation is essential to avoid wasted spend.

With patience, testing and attention to detail, you can use Google Ads to reach the right customers at the right time, while keeping control of your costs.