Google Ad Rank is a critically important element in AdWords because it not only determines your ad position by keyword and bid for every search query, but the price you pay for whatever position you achieved as a result of your bid.
This week, Google rolled out a change to Ad Rank that forces marketers to revisit their online marketing strategies.
The Impact of Ad Extensions
There have been numerous changes to Quality Score (QS) over the years, but this latest update is a change in their algorithm, making it rather significant.
Since AdWords extensions were rolled out, savvy advertisers have been using them heavily, due to the increased CTR delivered by the extensions. For example, in the past, even if the advertiser wasn't particularly interested in engaging with consumers, customers, or prospects on the Google Plus platform, the social extension provided a measurable boost in CTR (assuming the same position). Reviews and call extensions have similar impacts, particularly when they are displayed at the same time.
There has been a fair amount of disagreement within the industry as to whether Google used the increases in CTR driven by the extensions as a lift in calculating Quality Score. Obviously, to have done so would have given advertisers with extensions turned on a double benefit: both higher position and lower billed CPC as a result of how Quality Score and CPC bid interact within the AdRank formula.
In this announcement on the Google AdWords blog, it seems that if there had been any Quality Score increase as a result of extensions, Google now wants to back that out and instead adjust the AdRank calculation directly, by picking the best possible extensions.
Let's deconstruct Google's announcement and recommend some strategy shifts required as a result of the change:
1. If You Aren't Using Extensions, Use Them Now
...and the more the better (assuming that the usage case meets your marketing objectives). There are lots of extensions available and more in beta. Google will pick the best extensions to use, based on what Google knows about the searcher. Specifically, Google indicated:
"Ad extensions and formats can now influence the position of your ad on the search results page. If two competing ads have the same bid and quality, then the ad with the more positive expected impact from extensions will generally appear in a higher position than the other."
Therefore, failure to have relevant extensions has a significant downside. More evidence is found further on in Google's statement:
"In each auction, we'll generally show your highest performing and most useful combination of extensions and formats among those eligible. So there's no need to try to guess which extensions will help improve your clickthrough rate the most."
2) Review Your Ad Groups
...and think about (analyze) how each of the ads might interact or conflict with ad extensions that might fire for a specific query.
Google's specific comment relating to this to-do item is:
"Because Ad Rank is now more important in determining whether your ad is shown with extensions and formats, you might need to increase your Quality Score, bid, or both for extensions and formats to appear."
Another way of interpreting this statement is that if you already have done your optimization work on getting Quality Score as high as possible, you may have to step up your bids to get your extensions to show. Since extensions increase CTR, this puts you in a difficult position.
3) Focus on Relevance
Less relevant advertisers will find themselves forced to pay more for position:
"You may see lower or higher average CPCs in your account. You may see lower CPCs if your extensions and formats are highly relevant, and we expect a large positive performance impact relative to other competitors in the auction. In other cases, you may see higher CPCs because of an improvement in ad position or increased competition from other ads with a high expected impact from formats."
4) Understand Quality Score
Google may be using a raw Quality Score and not in fact giving Quality Score increases to advertisers whose ads are more relevant as a result of extensions. This means that any previous benefit you got to QS as a result of extensions will be backed out. Make sure your ad campaigns are in the best possible structural shape with the best possible ads.
5) Revisit Your KPIs Internally
If you are part of an online-only team and don't get credit for store visits or phone calls, this change may be a catalyst for adding phone calls or store visits to the mix of positive outcomes from a paid search campaign. Similarly, social media touchpoints have some value independently, and Google's new AdRank formula may not show your ad to certain searchers unless you have that extension turned on, because they consider that extension to be relevant to the searcher.
We'll be watching accounts very carefully and engaging in testing to further understand the implications of this change, as well as whether or not the new "offers" PLA-specific extension seems to be in play here as well. Stay tuned.
Meet Your Favorite ClickZ Contributors
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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.
March 19, 2014