SECOND SIGHTING

In short, who bids highest wins, which is of course how it’s always going to be – for Google, Yahoo! & everybody else. But here’s how the process works in detail. Firstly, we know that Quality Score is used in two stages when showing your ads on the search network. Google themselves say:

“The formula behind Quality Score varies depending on whether it is calculating minimum bids or assigning ad position.”

Stage 1 – The Minimum Bid

This stage is used to calculate the keywords Quality Score, which Google shows to you at least in part via the keywords minimum bid. Google mostly uses keyword CTR, keyword relevance to its ad group & your landing page to calculate this Quality Score.

Stage 2- Ad Position

Ad Quality Score is used to determine an ads position on the page. The ad Quality Score is very heavily influenced by maximum CPC compared to CTR & other factors. Unless your keyword has been given a really good Quality Score, then if you want to be in #1 position you pretty much have to bid yourself there. The result is that ads are ranked mostly in order of maximum CPC, with perhaps one or two positions on a page changing due to the effects of keyword Quality Score.

The Result? To Rank #1 You Have to Bid #1

You might have an amazing keyword Quality Score, but you’re still not going to get the traffic unless you bid high. You may only ever get charged £5 a click on a keyword with a maximum CPC of £10, but you still have to put in that £10 bid to stay in your position. Try it yourself, find a keyword that has a really good Quality Score (signified by a low minimum bid) and an average CPC quite a bit lower than your maximum. Drop the maximum bid so its somewhere between the average CPC and what it’s currently set to. Theres a very good chance that even though you pay exactly the same for a click, your ads position will drop.

Google Wins Every Time

Google profits in so many ways from doing things like this. Think about it:

• The onus is always on the advertiser to do all the work. Want to rank higher? Then bid higher. Want to pay less per click? Optimize your ad.
• Higher bids are encouraged by Google, both explicitly & implicitly by scenarios such as the one described above. Higher bids of course means more money for Google.
• Google only charges a proportion of each advertisers bid. Google not making enough money? Tweak the formula so it relies even more on CPC, and take a bigger chunk of the bid. More money in an instant, without needing to wait for the advertisers to do anything.
• There is enough emphasis on keyword Quality Score to keep advertisers optimizing their ads, thus constantly improving the quality of ads on Google. Google gets a better advertising network thanks to other peoples hard work.

In my opinion this is something Yahoo! and Microsoft still don’t fully understand, and one of the reasons why Google is way ahead of them in the advertising world.