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Friday, October 31, 2008

Ad Position, CTR & Quality Score - We're Going to do What we Already Did

New post at the AdWords blog this morning about our favorite topic, the quality score. Before I get to the meat of this post I wanted to highlight one line from that post:

"Clickthrough rate (CTR) is the most significant component of Quality Score"

(We already knew that...just added in case anyone is still unclear about how they can improve their quality score...)

Ok now on what this post is actually about. For years Google has said - in person and in writing that ad position is taken into consideration (normalized) in terms using CTR to determine the quality score. More precisely Google has said:

Misconception: Showing up in a higher position will benefit my Quality Score

Fact: Quality score is normalized to compensate for differences in performance for ads in different positions.
  • An ad in a higher position is predisposed to get a better CTR.
  • An ad above the search results is predisposed to get a better CTR.
I know I'm not the only one that's been given this information.

The post today on the AdWords blog says:

"As you probably have observed, ads in high positions typically earn better CTR than those in low positions, because ads in high positions are more visible to searchers. To calculate the most accurate Quality Scores, it's important that the influence of ad position on CTR be taken into account and removed from the Quality Score.

In the coming days, we'll update the portion of the Quality Score algorithm that accounts for ad position. This will result in more accurate Quality Scores, ensure that ads compete fairly for position based on their quality and bid, and enable Google to show the most relevant ads to searchers by rewarding high-quality advertisers with better ad positions."

Based on what Google has said in the past I think the majority of advertisers assume that what Google is saying they are now going to "update" has indeed already been in place for years. I mean can you make some thing more normalized?

A column I read at Search Engine Land this this morning further adds to the confusion. The article states:

"In the past, CTR was all equal. No matter how high or low your ad appeared, an impression on the ad was an impression and it counted towards your quality score equally. For example, if your ad was in the 8th position, on the first page of a search result, you were less likely to be clicked on than an ad in the first or second position. But since the CTR was calculated equally, Google did not take into account that the first or second ad would have a higher probability of being clicked on than an ad in the 8th position. This upgrade will change that and now will take into account the ad position while calculating the quality score. Google said this should make the quality score more accurate, allow ads to “compete fairly” and show searchers more relevant ads."

So after reading everything this morning I think we're left with 2 choices:

1) CTR already is and has been normalized by ad position in relation to calculating the quality score. Google's now somehow going to do this "better". If someone could explain to to a simpleton like myself how this may work I would appreciate it.

2) The SEL column is correct and up until this announcement there has been no normalization for CTR/quality score at all.

Personally, I lean towards #1 based on all the data I've seen over the past few years but given the fact that up until somewhat recently advertisers really couldn't even see their quality score with any level of granularity I won't say I could produce factual data to back up my assumption. I'm just curious how this could be done "better" as Google is now claiming they are going to do.

Any thoughts?

Thursday, October 16, 2008

Understanding the AdWords Quality Score

A new post on the Google Blog today talks about the quality score and ad auctions. If you use AdWords read it, it's worth the time. In my opinion the most important paragraph in the post is this one:

"What matters in this decision is not simply an advertiser's value for a single click -– the maximum CPC that the advertiser is willing to pay -- but rather the total estimated value of showing that ad: the value per click times the number of clicks that the ad is likely to receive."


AdWords Quality Score = Google Revenue Potential
High AdWords Quality Score = High Google Revenue Potential
Low AdWords Quality Score = Low Google Revenue Potential

I spend a lot of time in forums and other areas where AdWords users congregate and without fail the most common question (and biggest source of frustration) is the AdWords quality score. Advertisers just can't understand why they are getting a poor quality score because in their eyes their campaign/ad group/keyword/landing page is "completely relevant" and should have a perfect 10/10 quality score.

Once you understand that in terms of it's ad network Google's yield management practices are what drives the quality score it becomes a little easier, at least from a conceptual level, to improve your quality score. Yield management, from an ad serving point of view, means extracting the maximum amount of revenue from a fixed quantity of perishable goods and/or services (ad impressions).

Simply stated that just means Google wants to make the maximum amount of ad revenue from every single ad impression generated within their ad network. If you want to improve your quality score demonstrate to the quality score (yield management) algorithm that your ad stands to make more money for Google than other ads in the same auction and you will receive a better quality score.

Typically when I reach this point in the conversation with people a common response to the above is something along the lines of I'll raise my bids so I'm in a higher position and that should improve my CTR. A higher bid + a better CTR should give Google what they want and should help me raise my quality score.

Unfortunately that approach doesn't work and often just ends up frustrating the advertiser when they see all the extra money they are spending but are not seeing an improvement to their quality score. In relation to determining your quality score, Google normalizes CTR by ad position. That just means that Google knows higher positions get higher click through rates and that's taken into account when determining your quality score. When an advertiser increases their bid to get a higher position and improve their CTR all they've really done is moved a poor performing ad into a higher position on the page. They won't see an improvement in their quality score and will likely just end up drastically increasing their actual CPC without any quality score related benefits.

The best way to improve your quality score, both short and long term, is to work on improving your CTR. CTR is huge part of the quality score and can be influenced by advertisers rapidly with great ads / ad groups. Check out the following for more info about CTR and improving CTR:

- AdWords Tips
- How to Improve Your AdWords Quality Score (nice section on improving CTR)
- Q&A - What is a goof Click Through Rate?
- 31 Killer AdWords Ads Tips

If you have tips or suggestions on how to improve AdWords CTR's comment away!

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