Formula to Calculate Google Adwords Ad Rank and Actual CPC

CPC: What Is Cost Per Click? CPC is short form of cost per click ,which  you pay for each click on your  ads in your marketing campaigns.

Types of CPC:

(1)Manual CPC

(2)Maximize Clicks

(3)ECPC (Enhanced CPC)

Manual CPC:

•        With Manual Cost-Per-Click (CPC) bidding, you can set a maximum price on the cost of someone clicking on your AdWords ads.

•        Note: You can get good value with this bidding method because you pay only when a viewer is interested enough to click your ad.

How Manual CPC bidding works:

•        Example

•        If you think it's worth 19rs to have someone visit your website, you can set 19rs as your max. CPC. You'll pay a maximum of 19rs when a person reads your ad and clicks it, and you pay nothing if they don't click.

•        Let's say you create a text ad and set a max. CPC bid of  19rs. If 500 people see the ad, and 23 of them click to learn more, you pay only for those 23 clicks. Your max. CPC bid was 19rs, so you'll pay no more than 23 clicks x 19.

•        Often you'll pay less than your max. CPC because with the AdWords auction, the most you'll pay is what's minimally required to hold your ad position and any ad formats shown with your ad, such as sitelinks.

Maximize clicks:

•        Maximize Clicks automatically sets your bids to help get as many clicks as possible within your budget. 

•        Maximize Clicks, you set a target daily budget and the AdWords system automatically sets your maximum cost-per-click (CPC) bids on your behalf, with the goal of getting you the most clicks possible within that budget.

Enhanced cost-per-click (ECPC):

•        Enhanced cost-per-click (ECPC) automatically adjusts your manual bids to help you get more conversions, while trying to achieve the same cost-per-conversion.

•        ECPC is available as an optional feature with Manual CPC bidding.

•        With ECPC, you'll still have control over your bids just like you did before, but ECPC helps you by adjusting each bid based on how likely it is that a click will result in a conversion. If a click seems likely to convert, ECPC will raise your max CPC (after applying any bid adjustments you've set).

Manual CPC	Maximize clicks	ECPC
We can set Daily budget We can set  Max CPC bid amount for keywords NOTE: Actual CPC is often less than max. CPC because with the AdWords auction, the most you'll pay is what's minimally required to hold your ad position and any ad formats shown with your ad, such as sitelinks.	We can set daily budget We Can Not  set  Max cpc bid amount  for keywords	It   is optional with your  Manual CPC . If a click seems likely to convert, ECPC will raise your max CPC. Note: Keep in mind that your actual CPC may exceed your max. CPC if, for example, you’ve enabled Enhanced CPC or if you've set a bid adjustment.

Formula to Calculate Google Adwords Ad Rank and Actual CPC

AdRank:

AdRank = Max. CPC x Quality Score

AdRank is measured by multiplying the maximum cost per click bid that the advertiser is willing to pay by the Quality Score of that advertisers keyword. Ad position is then calculated by the advertiser’s AdRank. According to that advertisers ad will be positioned on highest or lowest position in Google search and content networks.

Advertiser	Max CPC	Quality Score	Ad rank	Position
Advertiser A	$0.40	6	$0.40 x 6 = 2.4	1
Advertiser B	$0.35	5	$0.35 x 5 = 1.8	2
Advertiser C	$0.80	2	$0.80 x 2 = 1.6	3
Advertiser D	$1.00	1	$1.00 x 1= 1	4
Advertiser E	$0.05	5	$0.05 x 5 = .3	5
Advertiser F	$0.10	2	$0.10 x 3 = .2	6

From the above example you can find that, in spite of Advertiser D is bidding well while comparing all of his competitors his ads will show in the 4th position due to his low Quality Score.

Determining Actual CPC:

Actual CPC = (AdRank to hit /Quality Score of Advertiser) + $.01

An advertiser’s actual CPC is measured by dividing the AdRank to hit (the AdRank of the competitor below them) by their own Quality Score plus $.01. The least positioned ad will be the minimum price recommended by Google to display on the Adwords page.

Advertiser	Max CPC	Quality Score	Ad rank	Position	Actual CPC
Advertiser A	$0.40	6	$0.40 x 6 = 2.4	1	(1.8/6) + $.01 = $0.31
Advertiser B	$0.35	5	$0.35 x 5 = 1.8	2	(1.6/5) + $.01 = $0.33
Advertiser C	$0.80	2	$0.80 x 2 = 1.6	3	(1/2) + $.01 = $0.51
Advertiser D	$1.00	1	$1.00 x 1= 1	4	(0.3/1) + $.01 = $0.31
Advertiser E	$0.05	5	$0.05 x 5 = .3	5	(0.2/5) + $.01 = $0.05
Advertiser F	$0.10	2	$0.10 x 3 = .2	6	Minimum Bid

From the above example you can find that, since the quality score of Advertiser C is very low, he needs to pay more amounts to beat Advertiser E.

The quality score speaks a lot in this. From the below example you can find the value of quality score. By increasing the quality score, the ad rank will also automatically increase to hit the top positions. In the below table, Advertiser B has increased their Quality score and check how his rank get increased to hit the top position.

Advertiser	Max CPC	Quality Score	Ad rank	Position	Actual CPC
Advertiser A	$0.40	6	$0.40 x 6 = 2.4	2	(3.2/6) + $.01 = $0.54
Advertiser B	$0.35	9	$0.35 x 9 = 3.2	1	(1.6/9) + $.01 = $0.19
Advertiser C	$0.80	2	$0.80 x 2 = 1.6	3	(1/2) + $.01 = $0.51
Advertiser D	$1.00	1	$1.00 x 1= 1	4	(0.3/1) + $.01 = $0.31
Advertiser E	$0.05	5	$0.05 x 5 = .3	5	(0.2/5) + $.01 = $0.05
Advertiser F	$0.10	2	$0.10 x 3 = .2	6	Minimum Bid

Quality Score is the good way to reach the desired top positions and reduce your costs. To become a Adwords star and to have a success with Adwords, you must improve your CTR, the relevance of your Ads, quality of your landing pages and the speed of the landing pages.
also read more about ad position and ad rank given link below

http://blog.ommaurya.com/2018/02/about-ad-position-and-ad-rank.html