In the case of Google AdWords, how do they determine what ad appears in 1st place?
It’s based on many factors using a formula called Ad Rank. Ad Rank gives your ad a score based on keyword bid, your ad quality and your landing page (this is where your potential customer will land when they click on your ad, and it’s usually a specifically generated page for that product or service). Google also uses what’s known as, expected impact of extensions and other ad formats. This levels the playing field, so even if a competitor with a much larger budget bids more than you, you can still achieve a higher position with highly relevant keywords and ads.
Determining a budget depends on a few factors. The size and scope of your market, the competitiveness of your industry, the cost and profitability of your product or service to mention a few. With paid marketing it’s more important to focus on the return on investment rather that the cost associated in entering the marketplace.
A good formula is: # of keywords X 150 clicks/keyword X cost per click = Entry Budget
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