Google AdWords Strategy – Relevance
Google applies the same buy adwords account principle to AdWords advertisements. Ads that are more relevant than others are given preferential treatment. Less relevant ads are allowed to compete, but they are penalized by a high cost per click.
An automated program compares the search term not only to your advertisement text, but also to the keywords in its Ad Group, to the URL of the specified landing page and even to the textual content of the landing page itself, to determine how relevant these components are to each other. If all four are tightly integrated with the search term, you’ll pay a very low cost per click — perhaps only 5 cents — and still command a high position on Google’s first page. Any component that does not match the search term closely causes the CPC to rise, perhaps even by a factor of a hundred!
Every time Google displays your ad, it records the fact. This is known as an “impression”. If a surfer clicks on the ad, Google records that also, and divides the number of clicks by the number of impressions. The result gives your ad a “click-through” rate (CTR). A similar calculation is made for your keywords that appear in the search term, to give them their own click-through rate. Google AdWords assumes that, if a human clicks on your ad, it is probably relevant to the search term typed in.