Google AdWords auctions, with their use of quality score and ad rank, can seem more difficult to understand than they really are. There is a logical to it. It doesn’t take an economist to explain how it all works, but let’s listen to and watch one anyway. Hal Varian, Google’s chief economist, is featured in this video that explains how quality score and the auction works.
I find it rather charming to see an economist at a white board again. (I used to work for the Federal Reserve Bank.) No CGI here.
Learn why you could be bidding $4 for a keyword, but paying only $2.