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And Then There Were Three: Google Ad Display Increases

  |  August 19, 2005   |  Comments

More ads on Google’s SERP and other changes have significant ramifications for advertisers. Changes you can expect, and how to deal with them.

Google advertisers have a lot to contend with this week. Google has implemented the previously announced changes to the AdWords position calculation and billing algorithm, which use a more sophisticated quality score to calculate AdRank. The algorithmic change is accompanied by a simplified keyword state that replaces "on hold," "in trial," and "disabled" keyword states with "active" and "inactive" states.

The really big news is that Google boosted the screen real estate dedicated to paid search ads. In more searches, particularly queries with commercial intent, Google now displays three paid (sponsored) PPC (define) links instead of the traditional one or two.

Google spokesperson Michael Mayzel confirmed a change was made to the sponsored links area of the SERP (define), particularly when PPC results are highly relevant. Google clearly feels the user experience is positively affected by the change. It will also generate significantly more revenue for Google and deliver more clicks to marketers.

Mayzel commented, "Google is always working on improving the user experience and ad effectiveness. For highly commercial queries, we believe that an additional ad above the search results is good for both."

The two changes have significant ramifications for Google AdWords advertisers. Failure to change strategy in response will result in some surprises and less-than-optimal campaigns.

Here are some changes you can expect and appropriate alterations in strategy or tactics you might want to consider:

  • Position changes (up or down) due to quality score implementation. Quality score, a predicted click rate, is multiplied against your max bid to determine AdRank and, therefore, position. Take a fresh look at your ad creative or campaign structure. If necessary, raise your bid, but watch your billed click cost and volumes.

  • Changes in billed CTR (define) relative to your max bid. Often, there’s a difference between your max bid and billed click costs. As your own and your competitors’ AdRanks change, the AdWords discounter will work with new numbers.

  • Increased click-through in position three (or an average position reported in the vicinity of three). Consider whether the keywords in this position would better serve in another position.

  • Slight reduction in click-through for position two. Consider changing your bid to go after position one or three.

  • Increased overall spending. This is likely if you have a preponderance of listings with an average position from three to five (yes, position number four moves up the ranks to the top of the right rail).

  • Reevaluation of Q4 budgets. This is particularly likely if you’re an e-commerce marketer with heavy Q4 seasonality. With a third top position, a normally crazy Q4 becomes even hotter and more competitive. You may need to allocate additional budget.

  • Conversion rate changes due to position changes. Watch your return on investment (ROI) to see if you’re still on target and your overall campaign still meets objectives. Some conversion rates are influenced by position. Every marketer is different, so watch your campaign carefully.

Based on my research, Google hasn’t generally bumped up to three results for brand searches. So trademark holders and merchants who bid on trademarks may not be affected by the third position. However, the AdRank calculation change may be significantly affected over time as Google tunes the quality score.

With three PPC links at the top of the most important commercial queries, organic SEO (define), while still important, becomes less so. Organic links are pushed further down Google’s SERP, as they are in other engines’ SERPs. Yet a balanced search campaign always includes both organic and paid search.

The additional position in Google clearly escalates the importance of PPC search. Even if you have good organic SEO position, it isn’t enough. If you aren’t in PPC search results, chances are your competition is and will grab some of the valuable clicks you need for your business.

Recent Eyetools research predicts all three sponsored ad listings in Google will get a significant amount of eye-scan activity. That attention will translate into paid clicks. This has already been confirmed by the data we’re seeing.

On a side note, given the media and analyst frenzy, it’s surprising Wall Street analysts haven’t yet discovered Google’s changes. As I write, we haven’t seen much buzz in the analyst community or the mainstream media. One thing’s clear. Google is engineering the perfect storm for the holiday season: more listings and a more accurate relevancy-based yield maximization algorithm. It’ll be interesting to see what happens when "The Street" processes Google’s changes.

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Kevin Lee

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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