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Newsletter/Blog


2015-05-04
Search Engines - Market Prices


Google AdWords works on a bidding system where the highest bidder gets the best display position for their advertisement. Companies bid for specific Key Words and Phrases. Companies usually set a daily budget which means that a company who is at the top of paid search results in the morning might be nowhere in the afternoon.

Let’s look at a graph which displays how the powers of supply and demand determine a market price:

Companies like Google , Yahoo and Bing are suppliers. The higher the price the more they are willing to supply. Businesses who advertise with these companies create the demand. The lower the price the companies are willing to buy / advertise. Where supply and demand meets a market price is established.

But search engines are able to supply more than one display position for a specific key word or key phrase at a specific given time. (Displayed by broken arrows in below graph). This means that multiple market prices are established simultaneously. See graph below: 

Company A is willing to pay the most for a specific key word or search term and gets the best display position. Company B is willing to pay the second most and gets the second best display position. It is important to note that any company advertising can run out of their daily, weekly or monthly budget and disappear completely from paid search results.

Different Search Engines can offer different prices for the same keyword at a specific time. At the end of the day the advertisers are getting the same value, a click by someone searching for a specific search term.  Even if Google is the most widely used search engine this does not mean that they should be the only ones considered for Advertising. Other companies might be offering the same Keywords, the same value at a lower price. The problem is that AdWords advertising are usually done trough an AdWords specialist and that they charge a monthly fee. They would have to charge a higher fixed monthly fee if they had to manage more than one advertising account with search engines because of the time involved setting up these accounts and managing them.

This might change as business owners and in-house web designers become more knowledgeable about advertising directly with the various search engines to get the best return on their advertising budgets. See graph below: 


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