Changes to the AdWords Algorithm - Part 3,009,342.5

Posted Monday, November 3rd, 2008 by Mike Pantoliano, in Search Engine Marketing

It seems Google will soon be making yet another change to their AdWords Algorithm. On their Inside AdWords blog they detail the changes, and make one somewhat surprising comment.

CTR based on Ad Rank

The quality score. It is the bane of the search engine marketer’s existence. The amount of money that you bid, plus this mystical quality score, equates to your ad position. One of the factors that goes into the calculation of this quality score is an ad’s historical performance, i.e. the click through rate. Google determines an ad is of high quality if it is clicked often, among other factors. Here it is straight from the horses mouth:

Clickthrough rate (CTR) is the most significant component of Quality Score because it directly indicates which ads are most relevant to our searchers. 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.

What’s shocking about this is that Google didn’t take ad position into account before this announcement. Before this change, the ads that appeared higher were the benefactors of a higher click through rate, and a higher quality score. So it costs them less to appear towards the top, while the ads in the no-so-visible 8th position had both a lower CTR and quality score. Therefore the low ranking ad has to pay more to overcome its unfairly low quality score. This is hardly a fair system, and I’ll have to admit, I honestly thought Google took this into account already. Maybe I was giving them too much credit?