Linking Google AdWords and Google Analytics accounts

I had a few questions asked about how you can link your Google Analytics account to your new Google AdWords account as required by your new assignment, so I put together a short video walkthrough to show you how to do this:

   

Mentioned in the video is a promotional offer that Google is running where you can get a coupon code for $75 of free advertising on AdWords for spending $25 on any AdWords campaign.  This offer only applies to new AdWords users, so if you already have an AdWords account, you may not be able to take advantage of it.  The details of this offer can be found here.

Also mentioned in the video is this AdWords Help page that has a step-by-step walkthrough of how to link the two accounts.  Analytics Help also has a walkthrough available with screenshots.  

Good luck!

Google Ad Auctions Explained by Hal Varian

Google AdWords determines the price advertisers pay for clicks in realtime ad auctions on Google Search Engine Results Pages (SERPs).  This means with every search query a user submits on Google, an auction takes place.

In this video, Google's Chief Economist Hal Varian explains how the auctions work.

Important to note that Google gives each competing ad an "Ad Rank" that is computed by multiplying its Maximum Bid an advertiser is willing to pay with the Quality Score that Google assigns your ad/keyword/landing page.  The higher your ad rank, the higher your ad's position on the SERP.

Ad Rank = (Max Bid) * (Quality Score)

The price you pay (p₁) is directly related to the maximum bid (b₂) of the advertiser below your ad - though the Quality Score of each ad (Q₁ and Q₂, respectively) is also taken into consideration.

p₁Q₁ = b₂Q₂

Since b₂Q₂ is essentially the Ad Rank of the ad below your ad, the price you pay is equal to the Ad Rank of the ad below yours divided by your Quality Score.

p₁ = b₂Q₂ / Q₁