October 2013 saw Google announce changes that are set to revolutionise the bidding war on Google’s AdWords platform.
What’s the Shakeup?
Traditionally, the position won by an ad was determined by AdRank; a combination of quality score, and bids ($) on clicks. The amount paid for a click was to some degree affected by AdRank and the associated quality score Google assigned a particular keyword. Simple.
The formula was:
Ad Rank = (Your bid) x (Your Quality Score)
Example: Say we bid $2.00 on a keyword and had a quality score of 8/10.
Ad Rank = 16 = (2) x (8)
And say a competitor was bidding $3.00 on that same keyword but their quality score was 5/10.
Ad Rank = 15 = (3) x (5)
We would win the auction, receiving the top Ad position, and (assumedly) more clicks. Hashtag ‘winning’.
Now, Google has added in a third variable being, “expected impact of your ad extensions”. For novices, ad extensions are features such as Google Map links to locations, direct click to call phone numbers, extra sitelinks, to name a few – and image options are hopefully coming soon to a screen near you.
An example of a click to call ad extension.
Conventionally these were optional add-ons and widely speaking they have been good additions to campaigns, depending on the platforms and audience segments we have been targeting.
Here’s the Shakedown!
With the introduction of this new ranking algorithm it’s important to point out that we should be expecting to see some possible changes to our CPCs (costs-per-click) and ad positions. Bummer.
First of all the formula changes:
Ad Rank = (Your bid) x (Your Quality Score) x (Expected Impact of Your Ad Extensions)
How Google is going to determine the “expected impact of your ad extensions” is really anyone’s guess. Any takers?
What we can possibly expect is higher CPCs, especially if other competitors increase their use of ad extensions (which they undoubtedly will – we certainly will be). Google claims we can expect lower CPCs if ad extensions are highly relevant to user contexts… I’m yet to be convinced that we’ll see a decrease as everyone scrambles to remain relevant and increases their bids to ensure they remain at the top of search results; whilst also adding extensions to their ads.
There are plenty of user benefits that will come from this, primarily making ads easier for searchers to filter and compare the relevance to their search, before they even click.
So it looks like the honeymoon period of using these extensions as good optional extras is over. Let the bidding war begin (or is that continue?).