Ad Auction

An auction determines which ads are shown, the order they will appear, and how much they will cost. Like the Google Ads auction, YouTube ads are ranked based on Ad Rank, which is based on the maximum CPC bid and the ad’s quality score.

Ad Rank = CPC bid × Ad Quality

The quality score measures the relevance of the ad to what the viewer is seeking. It has three components; the biggest amongst them is the click-through-rate (CTR). CTR is the means of incorporating users’ feedback to the Ad Rank. Relevancy is the next largest component. It ensures that relevant and useful ads are displayed to users. The third component is the landing page quality. (See section Google's Ad Auction — How it Works for more details on YouTube ad auctions).

Google Ads provides advertisers considerable information on the performance of their ads for optimization and testing purposes. Key metrics include views (completed views as well as quartiles), reach and frequency, engagement metrics such as CTR and clicks on other interactive elements, and average cost-per-view.

These metrics are covered in more detail in the chapter, Advertising Analytics, under the next section YouTube Analytics. They help advertisers evaluate their video ad spend, and optimize their spend on YouTube advertisements.

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