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Amol Ghemud Published: February 22, 2019
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The parameters and methods for digital marketing have changed drastically in the last 5 years. With technological innovations coming in leaps, algorithms for online searches and analytical methods even make use of artificial intelligence.
The digital transformations have primarily been the result of evolution in consumer behavior with increased internet penetration into almost every aspect of life over a significant period of time.
Watch: The CPC vs Ad Position Battle Explained
This video explores the complex relationship between CPC, ad position, and conversion rates in paid search campaigns.
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Advertising and marketing are the lifeblood of – businesses today, but digital marketing methods and tools are vastly different from traditional ones. And even the field of digital marketing has changed dramatically in the last couple of years.
Every company with an internet presence must handle several issues simultaneously. Whether it is learning about customer behavior, managing the brand and social presence on different platforms, finding the right mix of tools is important.
There is a fine balancing act considering digital marketing companies use marketing tools from the following strategic categories:
1.Organic Social Media 2.Paid Social Media 3.Email Marketing 4.Display Retargeting 5.Programmatic Advertising 6.Website Testing 7.Video Hosting 8.Content Creation 9.Content Curation 10.Website Analytics 11.Customer Service 12.Search Engine Optimization
Tech -savvy customers and stiff competition require businesses to constantly work at keeping their brand front and center or lose market share.
Almost every brand today uses a blend of social media marketing and other tools to generate more traffic to -their websites. Companies must close the gap between a customer’s opinion and the perception of their online shopping experience.
Since this is the most critical element of a marketing and advertising plan, constant work on Conversion Rate Optimization is absolutely necessary.
As far as customers are concerned, experts say that they already do 80% of their research before they get to a purchase.
To influence a customer before they get to this point, companies have started paying for advertising as it now offers them more value for their money.
It is easy to target the right customer base. However, there is a constant debate about which one works better – Cost-Per-Click or Ad position and if a contest between the two in any manner affects the overall conversion rates.
Let us look at how the fight between CPC and Ad position impacts the customer conversion rates.
What Does CPC Or Cost Per Click Mean?
CPC refers to the actual price that you pay for each click in your Google Ads or PPC marketing campaigns.
A “click” on your PPC ads represents a visit or an engagement with the products or services offered by your company. Every single click represents attention from people who are searching for something that you are offering.
It is this “attention” that you are buying, and it is important to know two things:
The type of attention that you are going after The amount you are paying for it
How to Calculate CPC?
The formula for CPC is:
Image: How to Calculate CPC?
As an advertiser, your CPC will always be equal to or less than your maximum bid because it is an average of bids against a number of competitors over a given period of time.
Given the way that auctions work in Google Ads, your actual CPC is going to be influenced heavily by you, as well as, your closest competitor’s ad rank, quality score and maximum bid.
Pay per Click or Cost per Click is used by websites to generate sales and revenue based on how many times a user clicks on an ad. Every search engine works at matching advertisers and publishers – and one of the biggest is Google Ads.
The desire to be in position #1. The urge to get ahead of competition. The notion that ads not seen in top 3 are not seen at all. Altogether these are common parameters among businesses using Google Ads.
The problem is that there are just too many business owners and subsequent marketing techniques reacting emotionally to Google Ads. Oddly enough, they have the data required to make decisions, but they are letting their ego get in the way.
The Quality Score metric is used to correlate ad relevance and keywords.
Important variables like Click Through rate (CTR) and Keyword and / or content coherence are key to getting better traffic to a page.
CTRs are considered for every keyword and for an Ads account. In case of keywords, it is essential to create an ad for each keyword group so that the Quality Score is positive.
One way to find out if the CTR is good is whether the ad is displayed at the top or / and on the very first page of search results where it is displayed based on its rank – because the higher the ad’s rank, the higher its position
Which essentially means that the score will determine where the ad will be placed and how much you may want to pay for it. Google uses the QS to prevent advertisers with a significant marketing budget at their disposal from buying keywords.
This also rewards those who use advertise using good principles and keyword use to make their ads better. Mastering the QS can result in good campaigns and lower per click payments.
What About Ad Position?
An ad position is where your ad is placed on a list of auction results.
Ad position, also known as ad rank is determined by the following formula: Ad Position = Max Bid x Quality Score x Expected Impact of Extensions
For instance, if you get a position of 1, this means it was the first to be shown and no other brand precedes it. This position doesn’t indicate that yours will be first in search results.
It could be if there are no others in organic search results. If yours is 2, it could be 2 in order, above or below the search results. One way to check your position is to check the average position metrics or the top and absolute metrics to check the overall placement in a search results page.
Google uses an auction method to decide the position as well as which ads should be shown. This Ad Ranking also decides if your ads should be eligible for visibility.
To get a general idea, the Ad Rank has 5 elements:
1.A Bid 2.Ad quality and landing pages 3.Does your Ad meet the minimum thresholds? 4.Search context 5.Expected impact resulting form ad extensions and formats
Let’s look at a test case – if 5 companies are competing for the top 4 positions on a Google search page and their rankings are 80, 50, 30, 10, and 5.
If the minimum rank required to show search results is 40 then only the 80 and 50 will show in the area about the search results.
If the minimum required to feature below the search results is 8 then the other two (ranks of 30 and 10) will show.
Image: Ad Rank
As an advertiser, you must improve the quality of the ad and the landing page and raise your bid amount to get the top and absolute best location of the search results page.
So, does this mean that if an ad is good, it will have a better Ad Rank? Any time a person initiates a search and it triggers an ad that is competing in an auction, Ad Rank is calculated.
The calculation takes your expected CTR, bid, landing page experience. Ad relevance and others into account before coming up with a number.
If you want to improve your Ad Rank, you should work on your ad’s click through rate. Search relevance and landing page quality.
Do Keyword Variations Have A Role to Play?
Assuming that you are facing tough competition in the industry and cannot afford a huge Google Ads budget, you can benefit from performing additional keyword research. Look for different keyword variations. You can make use of Google’s Keyword Planner tool to get additional ideas.
Image: Do Keyword Variations Have A Role to Play?
You can even filter searches in the Keyword Planner and request the tool to show average CPC estimates for each keyword. Which Is Better for Conversion Rates – CPC Or Ad Position?
Unlike 3 or 4 years ago, there are ways to get good rankings, visibility and conversion rates without having to be No.1 with a specific keyword.
The average position is what is called a dependent variable and conversion rates are not influenced by Ads metrics. Your average position should be determined by your CPA goals and conversion rates. By controlling what you can do, your ad position will be the output.
Variables like average order value, landing pages, product margin, return on Ad Spend and others are key to your target Cost Per Action. What many don’t realize is that there is no correlation between conversion rates and ad ranks.
If you can get these under control, you can get the top position, and not the other way around.
Make sure to have a CPA goal and price range which will lead to profitability.
Keep in mind that you don’t have to show up all the time for a specific keyword. Don’t make the mistake of spending a lot of money to attract more volume. Figure out whether your offer is good enough to keep you in the game.
Even if your ad is in position 3, you will get a lot of clicks. The takeaway here is to bid so that you are profitable – don’t go for position.
There is plenty of data to indicate that this is true – sticking with data. Which has been analyzed right will offer better insights into structuring your business.
Factors like time of day scheduling and keyword positions can play a key role in higher conversion rates. It is not necessary to be at the top all the time.
Cost-Per-Click represents the price you pay for a single interaction, but more strategically, it is the cost of capturing a potential customer's attention. Understanding this metric is vital because it directly connects your advertising spend to tangible user engagement, forming the basis of your campaign’s financial efficiency and Return on Ad Spend (ROAS). Your actual CPC is not a fixed number; it is an average influenced by competitor bids and your own Quality Score. A lower CPC is not always better if it means sacrificing ad position and visibility. A deep understanding of its components helps you make informed bidding decisions rather than just aiming for the cheapest clicks. Explore the nuances of the CPC formula and its relationship with ad rank to gain a competitive edge in your campaigns.
Relying on a single channel is risky because today's customers interact with brands across numerous touchpoints before making a purchase. A blended strategy creates a resilient marketing ecosystem where each tool supports the others, ensuring your brand remains visible throughout the entire customer journey. For instance, a cohesive approach involves:
Search Engine Optimization (SEO) to attract organic traffic from users actively seeking solutions.
Paid Social Media to build brand awareness and target specific demographics.
Email Marketing to nurture leads generated from SEO and social channels.
Display Retargeting to re-engage website visitors who did not convert.
This multi-channel presence addresses the reality that customers complete up to 80% of their research independently. Discover how to select the right mix of tools for your business.
When prioritizing immediate sales, the central trade-off is between cost-efficiency and visibility. A low Cost-Per-Click (CPC) strategy conserves your budget, potentially generating more clicks for the same spend, but often results in lower ad positions with reduced visibility and click-through rates. Conversely, bidding for a top ad position increases visibility and attracts higher-intent clicks but at a higher cost. The optimal approach is not to choose one over the other but to find a balance. You should analyze conversion data to identify the point where ad position yields the highest conversion volume without inflating your customer acquisition cost to an unprofitable level. This decision requires a clear understanding of your target ROAS. Learn more about navigating this strategic balance for your campaigns.
This "80% research" statistic fundamentally shifts the goal of digital marketing from direct selling to influential guidance throughout the self-directed buyer journey. Your strategy must focus on being a valuable resource before a purchase is even considered, which means your Google Ads campaigns and content must work in concert. Your ads should target informational keywords, not just transactional ones, leading users to helpful content. For example, instead of only bidding on "buy running shoes," you should also target "best running shoes for flat feet." This approach builds trust and positions your brand as an authority, making it the default choice when the customer is ready to buy. This requires a strong emphasis on Content Creation and Website Analytics. Explore how to align your advertising with the modern research process.
Your actual Cost-Per-Click is not simply your maximum bid; it is determined by a dynamic auction formula where your competitor's ad rank is a key variable. Specifically, your actual CPC is calculated as (the ad rank of the competitor below you / your Quality Score) + $0.01. This shows that a high Quality Score is a powerful financial lever, as it directly lowers the price you pay for each click, even when competing against high bidders. A strong Quality Score allows you to win better ad positions at a lower cost, directly boosting your campaign’s profitability and ROAS. This means focusing on ad relevance and landing page experience is not just a best practice, it is a core financial strategy within Google Ads. Uncover more about how these auction mechanics can be managed to your advantage.
To systematically improve Google Ads profitability, you must move beyond surface-level metrics and analyze the interplay between cost, position, and quality. A focused process provides the clarity needed for effective optimization and better returns on your ad spend. Follow these essential steps:
Audit Your Quality Score: Examine the three components of your Quality Score at the keyword level and prioritize keywords with scores below 7 for improvement.
Analyze Ad Rank vs. CPC: Use the "Auction insights" report in Google Ads to see how your ad rank compares to competitors and if you are overpaying.
Implement A/B Testing: Continuously test ad copy and landing pages to improve relevance, which elevates your Quality Score and can lower your CPC.
Refine Bidding Strategy: Shift from a purely position-based bid strategy to one focused on achieving a target Return on Ad Spend (ROAS), aligning bids with business value.
Learn how to apply this framework to drive more profitable outcomes from your campaigns.
With AI-driven algorithms and deeper internet penetration, the digital marketing landscape is shifting towards personalization and predictive analytics. To maintain visibility, you must evolve from broad campaigns to hyper-targeted, context-aware interactions. The key adjustment is a tighter integration between your marketing tools, especially between content creation and website analytics. Your future strategy should prioritize:
Predictive SEO: Anticipate user intent using AI tools rather than just reacting to historical keyword data.
Automated Ad Bidding: Use smart bidding strategies in platforms like Google Ads that rely on machine learning.
Personalized Content Delivery: Leverage website testing and analytics to deliver dynamic content.
This proactive and data-centric approach will be essential to connect with customers in a more meaningful way. Prepare your strategy now for the changes that are on the horizon.
The primary risk of focusing exclusively on a low Cost-Per-Click (CPC) is sacrificing visibility and click quality, which often leads to lower overall conversion volume. Chasing cheap clicks typically lands your ads in lower positions where they are seen by fewer, less-motivated buyers, severely damaging your campaign's effectiveness. A successful campaign balances cost with impact. To avoid this common mistake, you should shift your focus from CPC to Conversion Rate Optimization and target ROAS. This involves analyzing performance data to find the ad position that delivers the most profitable conversions, even if the CPC is higher. This balanced approach ensures your budget is spent on clicks that are most likely to generate revenue. Find out how to connect your bidding strategy to real business outcomes.
Companies often make two critical mistakes: assuming they know what customers want without data, and creating a disjointed journey between their ads and their website. This disconnect between brand promise and user experience leads to high bounce rates and lost sales. Conversion Rate Optimization (CRO) provides a direct solution by using a data-driven framework to systematically improve the online experience. CRO is not about guesswork; it is about structured experimentation. The process involves:
Website Analytics Review: Identifying where users drop off in the conversion funnel.
Website Testing (A/B): Testing variations of headlines, calls-to-action, and page layouts.
Customer Service Feedback: Incorporating insights from customer interactions.
By focusing on CRO, you align your website with the expectations set by your marketing. Explore the specific techniques to close this critical gap.
Integrating your website analytics with paid social media is key to transforming generic ads into personalized reminders that drive conversions. An efficient display retargeting campaign relies on precise audience segmentation based on user behavior. The process is as follows:
Install Tracking Pixels: Place platform-specific pixels on your site to capture user actions like product views and "add to cart" events.
Create Custom Audiences: Build specific audiences based on this data, such as users who added an item to their cart in the last 7 days but did not purchase.
Develop Dynamic Ads: Use dynamic product ads that automatically show the specific products a user viewed.
Optimize Ad Creative: Tailor ad copy to each segment. For cart abandoners, offer a small discount or highlight free shipping to entice them back.
This integration ensures your budget is spent on warm leads, improving your ROAS. Learn more about creating this powerful feedback loop.
For a new product launch, paid social media and search engine optimization serve distinct but complementary purposes. Paid Social Media is ideal for generating initial awareness and demand, as you can proactively push your message to targeted demographics who may not know your product exists. Search Engine Optimization (SEO) is a long-term strategy for capturing existing demand from users who are actively searching for solutions. With a limited budget, the initial resource allocation should be weighted towards paid social. This is because SEO can take months to show results, while a paid social campaign can generate immediate traffic and market feedback. Once you validate product-market fit, you can reinvest profits into a more robust SEO and content strategy. Explore how to sequence these efforts for maximum launch impact.
The rise of AI in search fundamentally shifts the focus of SEO from keyword optimization to topic authority and user intent satisfaction. In the long term, businesses must prepare for a future where search engines prioritize content that provides the most comprehensive and direct answers. The critical implications include:
Emphasis on E-A-T: Expertise, Authoritativeness, and Trustworthiness will become even more crucial ranking factors as AI gets better at identifying genuine subject matter experts.
Rise of Conversational Search: Content must be structured to answer natural language questions posed to voice assistants and AI chatbots.
Decline of "Hacks":Technical SEO tricks will become less effective as AI learns to recognize and reward high-quality, user-centric content above all else.
Your strategy must evolve from simply targeting keywords to building a library of genuinely helpful content. Start building your topic authority today to stay ahead.
Amol has helped catalyse business growth with his strategic & data-driven methodologies. With a decade of experience in the field of marketing, he has donned multiple hats, from channel optimization, data analytics and creative brand positioning to growth engineering and sales.
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