Search Marketing

Google Continues AdWords Evolution with Changes to Ad Rank

October 23, 2013

Google has announced that they are making a change to Ad Rank, the formula that determines the order in which ads appear on a search engine results page.

Previously, Ad Rank was determined by two factors: Quality Score and Max CPC. Per this announcement, Google is throwing a third factor into the mix: expected impact from your ad extensions and formats.

The addition of a third factor into this equation is worth marketers’ attention as it is likely to impact CPCs – either negatively or positively, based on the case. That said, while any change to the way Google organizes results is significant, we do not expect CPCs to dramatically fluctuate, especially if advertisers have been using extensions all along.

Here is some key information about the change that marketers will want to know:

  • 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 assume the higher position.
  • Ad Rank is now more important in determining whether your ad is shown with extensions and formats, so marketers may need to improve Quality Score, raise their bids, or both for extensions and formats to appear.
  • Advertisers should ensure that they have fully enabled all relevant extensions, and Google will decide which combination of these to serve most frequently. Generally speaking, the combination that achieves the highest CTR will be shown most frequently.
  • When estimating the expected impact of extensions and ad formats, Google considers CTR, as well as the relevance and prominence of the extensions or formats on the SERP.
  • Advertisers may see lower CPCs if extensions and formats are highly relevant, and Google expects a large positive performance impact relative to other competitors in the auction. In other cases, a marketer could see higher CPCs due to a shift in ad position or increased competition from other ads with a high expected impact from formats.
  • For now, this update only applies to search ads appearing on Google Search. It does not affect ads within the Google Search Network.

Whereas in the past we knew that extensions tended to improve CTR, the relationship between that improved performance and CPCs was not explicit. That has now changed with this announcement, and managing extensions should play an even greater role in SEM strategy and execution.

As an immediate next step, marketers will want to conduct an audit of their account to address any gaps or issues with current extensions and ensure stable CPCs. In the long term, it will likely still be necessary to implement Google’s ad extensions and formats throughout the account.

Cover photo via Wired