Definition: “Ad Auction”
Each time a Google ad is eligible to appear in response to a search, that ad goes through an ad auction. This ad auction determines which ads appear for that specific search and the order in which those ads will appear on the page if any ads show at all.
The three main factors that determine which ads appear, and in what order are: your bid, the quality of your ads, and the expected impact from ad extensions and other ad formats. Learn more about how bidding on keywords can help you create a cost-effective campaign.
Pro tip: even if your competition has higher ad bids than yours, your ads can still win a more top position–at a lower price–by using highly relevant keywords and ads.