Ads are positioned on search and content pages based on their Ad Rank. The ad with the highest Ad Rank appears in the first position, and so on down the page.
The criteria determining Ad Rank differ for ads on search results pages (which are always targeted by keywords only) and ads targeted by keywords on content sites. There's also a third set of criteria determining if an ad targeted only by a placement will appear on that placement.
A keyword-targeted ad is ranked on a search result page based on the matched keyword's cost-per-click (CPC) bid and Quality Score, which is calculated from its clickthrough rate (CTR) on Google, the relevance of your ad and keyword to the search query, and other relevance factors.
A keyword-targeted ad is ranked on a content page based on its content bid and Quality Score, which is calculated by the ad's past performance on that and similar sites, your landing page quality, and other relevance factors. This is true even if you have also targeted placements in the ad group, and even if you have chosen 'Relevant pages only on the placements I target' as your content network setting. If a keyword helps target your ad on the content network, then the keyword-targeted Quality Score formula is used.
If an ad is targeted by placement only, without keywords, its will appear if its Ad Rank is higher than that of all the competing ads. It will appear as the only ad on that page. For an ad targeted by placement only with cost-per-thousand impressions(CPM) bidding, the Ad Rank is determined by its CPM bid and its Quality Score, which is derived from your landing page quality. For an ad targeted by placement only with CPC bidding, the clickthrough rate is also considered when creating the Quality Score.
Learn more about placement targeting.
Having high CPC and CPM bids, relevant ad text, a strong CTR, and a quality landing page will result in a higher position for all your ads. Because this ranking system uses relevance to help determine your ad's position, your ad can't be locked out of the top position based solely on price.
