Ads are positioned on search and content pages based on their Ad Rank. The ad with the highest Ad Rank can improve your ad’s position and reduce your actual CPC (Cost per Click).

Ad Rank = CPC Bid x Quality Score

CPC Bid is the Maximum Cost-per-click (Max. CPC) you are willing to pay for a single click when your keyword triggers your ad.

Quality Score for Google and the search network is a dynamic metric assigned to each of your keywords. The Quality Score for Ad Rank on Google and the search network is determined by:

• The historical click through rate (CTR) of the keyword and the matched ad on Google; if the ad is appearing on a search network page, its CTR on that search network partner is also considered. Your account history, which is measured by the CTR of all the ads and keywords in your account
• The historical CTR of the display URLs in the ad group
• The relevance of the keyword to the ads in its ad group
• The relevance of the keyword and the matched ad to the search query
• Your account’s performance in the geographical region where the ad will be shown
• Other relevance factors

Ad Rank = Max. CPC Bid x Quality Score

In the example above with 4 different advertisers, the Ad Rank of advertiser B’s ad is determined by:

Ad Rank (of B) = Max. CPC (of B) x Quality Score (of B)

Ad Rank = Max. CPC Bid x Quality Score

In the example above with 3 ads, the Actual CPC of advertiser A’s ad is calculated as:

Actual CPC (of A) x Quality Score (of A) = Max. CPC (of B) x Quality Score (of B)
where
Actual CPC (of A) = Ad Rank (of B) / Quality Score (of A)

Relevant keywords and ad copy, a high CTR on Google, and a high Maximum CPC (CPC Bid) will improve the ranking of your ad.

You can even take your ad ranking one step further. Once your ad exceeds a certain Quality Score and CPC Bid threshold, it is eligible to appear above Google’s organic search results as opposed to on the right hand side. At any given time, up to a total of 3 ads are eligible for ranking above the organic search results.