Google will soon implement changes to the AdWords system that will affect all Google advertisers. The changes address two major areas: status or "keyword state," and the AdRank algorithm. As both have considerable effect on campaign strategy and tactics, today I'll offer you a road map by which to navigate the upcoming changes.
In some instances, the prior system was too complex and didn't adequately balance the needs of advertisers and searchers. Not surprisingly, Google's changes make it easier for marketers to spend more. Initially, it may even spur escalated bidding, particularly among generic keywords and trademarks.
The Simplified Keyword State
According to sources, starting in August the status, or keyword state, will be simpler. On hold, in trial, normal, and disabled keyword states will be replaced with active and inactive keywords states. In the past, keywords added to an AdWords campaign wouldn't go live across the entire network; instead, they'd launch in trial for a period of time. Now, words go live immediately and remain live as long as the bid is above the minimum calculated by the system (minimum bids by keyword will be determined based on new parameters, but more about that later).
Keywords that were disabled in the past due to low CTR (define) can be re-enabled by bidding above the system's new minimums. Minimum bids may go up or down (even as low as $0.01), and these minimums will be visible to you in AdWords' interface, as well as within the AdWords API (define) for campaign management solutions. Once keywords are running, they'll keep on running as long as the bids are sufficient. No more on-hold or in-trial quality issues that appear to defy explanation because some keywords had difficulty maintaining the arbitrary 0.5 percent CTR threshold, regardless of creative tweaks.
One way to interpret this change is that marketers are encouraged to bid higher. If the ad is active and doesn't show up or its average position reported in the Google AdWords interface is very high (meaning a high number, lower on the page), you'll have a chance to bid up or improve your "Quality Score."
Be ready to identify keywords that were disabled in the past. Consider whether they belong in your campaign. If they do, determine the best match type (broad, phrase, or exact); write the most accurate, compelling creative you can; and reactivate those keywords. Google will keep the disabled keywords for a month before purging them, in case the earlier creative and match type options are ones you want. If your keywords failed before, however, you may want to reconsider creative and match type if only to improve CTR -- which matters all the more.
If some of your current campaigns contain lots of on-hold or in-trial keywords, you may spend more as they become active. If lots of your competitors have on-hold or in-trial keywords, they may suddenly be back in your face, bidding against you for your favorite keywords.
The Improved AdRank Algorithm
The other big AdWords change is the Quality Score concept. Google has always used a normalized CTR to calculate AdRank. The current method has been evolving for some time to more accurately predict your CTR at every position. Google's ability to accurately predict CTR is critical to determining position, because AdRank multiplies the predicted CTR against your MaxBid to determine position.
This normalized, predicted CTR has reached a point where it takes into consideration many variables beyond your current position, all of which correlate with Google's idea of quality. Google won't disclose all the variables in the Quality Score calculation, other than to state Quality Score is determined by a combination of historical keyword performance among all advertisers, as well as ad performance, relevance of the creative or ad text, and other undisclosed, predictive factors. Some of those other factors may be domain name, brand, a keyword in the title or description, and other linguistic triggers.
Google's algorithm continues to let searchers vote on ads with their mice. It used to be only Google searchers counted in the normalization algorithm. Now, Google's extended network will also be used to calculate AdRank. Clearly, the Quality Score is truly trying to predict CTR at every instance, using all the expanded variables and attributes Google finds to be predictive.
Prior history follows ads for a while, so even if you improve ad copy to boost your Quality Score for a brief time, the earlier quality score is used, even if you "deserve" a higher score. Google will constantly (as often as several times a day) factor in the latest data and heavily weigh it to calculate the Quality Score. As your Quality Score increases, you may see an ad move up in position, or a decrease in billed CPC (define).
The Discounter that bills you just enough to retain your position based on the AdRank system remains in place. A frequently updated Quality Score system means great creative and well-tuned AdGroups (the right keyword mix and match type) continue to be very important to success and efficiency.
With Quality Score, Google continues to be fairly opaque in terms of insight into what to expect for position or spending. At least it's eliminated keyword labeling that wasn't as helpful as originally intended.
A fresh look at your campaigns, creative, keywords, and match types is in order.
Meet Kevin at Search Engine Strategies August 8-11 in San Jose, CA.
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Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.
Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.
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