Search Marketing Blog

How Adwords Uses The Quality Score To Decide Your Advert's Position, And Why It Matters

Most people understand that Google Adwords assigns a Quality Score to your keyword and advert, and that this is combined with the cost per click to somehow decide how much you have to pay per click, and what position your advert appears in.

But few actually understand exactly how it happens, and quite how important your quality score really is. If you’re one of these people, then read on, and I’ll explain…

Before we begin, you should be aware that there are two different versions of the Quality Score. The version that establishes your minimum cost per click is based on the relevance of your keyword to the search term, the clickthrough rate, the advert text and the relevance of the landing page. But the version that calculates your advert rank ignores the landing page. Strange, but true.

Firstly, there’s the question of what position your advert appears in. That’s fairly straightforward – the cost per click is multiplied by the quality score, and the adverts are ranked according to this. So, if you’ve got the following seven adverts, with the cost per clicks and quality scores given, the rankings would be as follows:

Advert          Bid           QS          Adj. Bid          Position
    A            £1.00         1.0       (1.0*1.0)=1.00          3
    B            £0.90         1.6       (0.9*1.6)=1.44          1
    C            £0.80         1.1       (0.8*1.1)=0.88          4
    D            £0.70         2.0       (0.7*2.0)=1.40          2
    E            £0.60         1.2       (0.6*1.2)=0.72          6
    F            £0.50         1.5       (0.5*1.4)=0.75          5
    G            £0.40         1.7       (0.4*1.7)=0.68          7

Now comes the hard part – how much do you actually bid to get that position?

Google starts with the bottom position – in this case G which is seventh – and charges the minimum bid. For the sake of argument, we’ll call this £0.10

To get sixth, advert E needs an adjusted bid of 0.69 (to beat the 0.68 for G). Given that it has a Quality Score of 1.2, the actual bid would need to be £0.57 (as £0.57 * 1.2 = £0.69).

To get fifth, advert F needs to beat the adjusted bid of 0.72 from G, which means that the actual bid for F would be (0.72/1.5) = £0.48

And so on…

Filling in the remaining numbers, you get the following:

Advert          Bid           QS          Adj. Bid          Position          Actual Bid
    B            £0.90         1.6       (0.9*1.6)=1.44          1                 £0.88
    D            £0.70         2.0       (0.7*2.0)=1.40          2                 £0.50
    A            £1.00         1.0       (1.0*1.0)=1.00          3                 £0.88
    C            £0.80         1.1       (0.8*1.1)=0.88          4                 £0.68
    F            £0.50         1.5       (0.5*1.4)=0.75          5                 £0.48
    E            £0.60         1.2       (0.6*1.2)=0.72          6                 £0.57
    G            £0.40         1.7       (0.4*1.7)=0.68          7                 £0.10

Which is useful to know, but how is this important?

Consider advert A, which is pretty hopeless, with a QS of 1.0. If A can get onto the same level as G, and improve the quality score to 1.7, it jumps to the top of the search ranking, and even ends up paying less! Instead of paying £0.88 to appear third, they would pay £0.85 to be top! Cheaper clicks, and twice as many of them! That’s a big return for just changing the advert text a bit, and making sure that the advert is more closely matched to the search term (you can do this by trying to turn your broad match traffic into phrase and exact match by adding new keywords).

But what if you’ve already got a good quality score? Is it worth trying to squeeze a little bit more out of your advert, or is your time better spent doing something else?

Consider advert F. What happens in the above example, if they increase their QS from 1.5 up to 1.55? They don’t move up the rankings, so it’s probably not worthwhile? Wrong. Two things happen here. Firstly, their advert costs £0.46 instead of £0.48. So they get about 5% more clicks for their money (if they are limited by their budget, or pay 5% less for their traffic (if they aren’t). That’s like getting 2½ weeks of traffic free every year.

But as always, Google doesn’t lose out (they’re very clever here!) as advert C pays £0.70 instead of £0.68 for their advert. So your competition are effectively giving you their money! Depending on how you feel about your main rivals, this may give you a very warm and fuzzy feeling inside…

PPC Advertising - Where Is The Sweet Spot?

Ask most people what the answer to this question is, and they’ll reel off an answer like “fourth” or “second”, but I think it’s fairly clear that the question is much more complex than that – after all, fourth place is going to be quite expensive on competitive terms, and if your site has a low conversion rate, you could easily lose money. On the other hand, if the term has few people bidding on it, then a higher position will only cost a few pence more and generate loads more conversions.

And you can’t really answer the question until you’ve decided what your objective is – do you want to generate as many conversions as you can for your budget, generate as many conversions as you can given a maximum fixed cost per conversion, maximise your return on investment, maximise your profit, get the highest position that you can without throwing away money in order to raise brand awareness, or something else?

And surely it has to depend on what your rivals are doing, doesn’t it? Are the people above you serious competition, or just people with lots of money and no idea what they’re doing? Are you trying to ‘beat’ these people, or make money?

Clearly, a simple one word answer isn’t quite going to cut it…

Before answering the question, there are a number of general rules of thumb that can be applied to PPC adverts.

1)       The higher your advert appears, the more clicks you will get (always true)

2)       The higher your advert appears, the more you pay per click (always true)

3)       The higher your advert appears, the lower your conversion rate will be (usually true)

Obviously, the text of your advert has an impact on all of these, but for the purposes of this blog, we’ll assume that you have a single advert.

Cost per conversion is generally a good measurement of the effectiveness of your campaign – it would be nice to analyse profit, or even a ratio of cost:demand, but unless you’ve got the tools to do this, the best you are likely to get is cost per conversion.

Cost per conversion can be calculated by dividing the cost per click by the conversion rate (conversions per click). Since we’ve stated that higher positions have higher cost per click AND lower conversion rate, it must therefore be true that the higher your ad appears, the more you have to pay per conversion.

So if your objective was to minimise the cost per conversion, or maximise your return on investment (which is pretty much the same thing if you don’t know your conversion value), then the simple answer is that your advert should appear last!

But that seems a bit silly, so perhaps this shouldn’t be your objective after all…

Clearly, it’s better to make a £1 from 100 people that to make a £5 from one person. So, from a purely analytical perspective, maximising your ‘profit’ has to be the way forward. If you are advertising for other reasons, such as raising brand awareness, then you may be willing to make less profit, in order to be seen by more people – but even so, the rest of this document is still important, so don’t leave yet!

The problem with profit, as I’ve already intimated, is that unless you know your margin and order value, you can’t actually calculate it. And what if you are generating leads? They don’t have a value or margin, do they?

Well, you can’t calculate it exactly, but you need some kind of idea what you will make from a conversion, or you’ll never be able to tell what the ‘best’ position is. In a nutshell, how much can you pay for a conversion, and still break even? If you can’t put a figure on this, you need to think hard about what you are actually trying to achieve with the campaign – it can’t be to make money!

I’ll assume that you’ve got a number – it doesn’t need to be exact, even a ballpark figure will be adequate for identifying your sweet spot.

What else do you need? Well, we’ve said that the conversion rate increases as you move down the results, and that the clickthrough rate and cost per click fall. You need to put numbers to this. Something along the lines of:

Position        Clickthru Rate        Conversion Rate         Cost/Click

    1                       10%                         1.0%                       £1.50

    2                        8%                          1.2%                       £1.30

    3                        6%                          1.4%                       £1.10

    4                        4%                          1.6%                       £1.00

    5                        2%                          1.7%                       £0.90

etc

Don’t use the numbers above, I’ve just made them up, and they will be different for each campaign, and probably even each adgroup or even each keyword. Again, these will have to be estimates, but by looking at the performance of keywords over time you can get some idea. If you really get stuck, change your cost per clicks every day or two for a few weeks, and get estimates that way.

Once you’ve got this table, calculate the cost per conversion (by dividing the cost per click by the conversion rate). Subtract this from your approximate income per conversion (take into account the cost of the goods/services!), and you get the ‘profit’ per conversion. So for the above figures, with product that retails for £150, with a cost to you of £75, the results would be:

Position        Profit/Conversion

1                 £75 – (£1.50/1.0%) = -£75

2                 £75 – (£1.30/1.2%) = -£33

3                 £75 – (£1.10/1.4%) = -£4

4                 £75 – (£1.00/1.6%) = £13

5                 £75 – (£0.90/1.7%) = £22

etc

As mentioned earlier, this will always increase, as you move further down the rankings. It should also level out quite quickly – the cost per click for 11^th and 20^th are usually reasonably close together, and clickthrough rates won’t vary too much either…

Next, multiply this by the conversion rate (to get the profit per click) then the clickthrough rate. This will turn the profit per conversion into the profit per impression. Multiply this in turn by the impressions per day (or month or year) to get the profit over that period. Here, we’ll assume 1000 impressions per day.

Position         Profit/Impression                                 Profit/Day

1                      (-£75*1.0%*10%) = -£0.075                     -£75.00

2                      (-£33*1.2%*8%) = -£0.032                       -£32.00

3                      (-£4*1.4%*6%) = -£0.003                         -£3.00

4                      (£13*1.6%*4%) = £0.008                           £8.00

5                      (£22*1.7%*2%) = £0.0075                         £7.50

You can multiply this by the number of impressions, in order to get a daily profit/loss for each position if you like, but in terms of finding the sweet spot, this isn’t really necessary.

So, in the above example, the sweet spot is 4^th, though any position below fourth will also show a small profit (as the income for each unit sold will always be more than the cost below this point).

Is all this work worth it? Perhaps not, if you are in fourth position, and haven’t got the budget to move into first or second – but the general rule is very useful. If you lower your bid, you’ll get fewer conversions, but each one will cost less, and if you raise it, you’ll get more conversions, but each one will cost a bit more.

What you will find, is that there are few situations where the top position is the most profitable – even if your site converts better than your competitors, your advert has a better clickthrough rate, and your margin on sales and average order value are better, you are still relying on them to do the same calculations that you have – otherwise they could be bidding over the odds, and competing with them just means that you lose money, they lose money and Google gets richer!

Google drops the bomb on googlebombing.

Backlinks backfire

I've been hit by it. You may have been too. February 2007 saw a massive index change as far as a lot of SEOs are concerned. Personally I lost 4 really competitive positions (top 3 on high traffic terms) on one website. These positions were literally buried in the results. Another was totally unaffected. Others are complaining too in the discussion forums "Really takes the wind out of your sails... You work and work and then it feels like Google just takes the rug right from under your feet. "

Personally I'd been working a year on my site, and almost feel like i'm back to square one. If you know about the importance of backlinks already, then hark back to the time when miserable failure made George Bush's CV on the white house page pop up as the number one result. Because it ain't they're anymore sonny.

Did Google lose their sense of humour? To be fair it was an old joke.

The basic trick of googlebombing was to exploit the 'authority' algorithm that attampts to find sites that point the user to a useful resource. You get as many sites to link to a target site with the same anchor text and in theory the target site should appear top of the results. In the case of miserable failure, thousands of webmasters and bloggers all linked to George Bush's CV on the whitehouse.gov website with the words 'miserable failure' causing that page to be seen by Google as the most authoritative page on miserable failures.

Google's latest (February 2007) algorithm change (known as the Google Dance) seems to have heavily penalised sites benefitting from that type of link strategy. It seems like a lot of backlinks (those links from external sites that point to you), from directories for example, have been devalued massively. I suspect this because the site that i lost major ground on one was the one that had recieved the most link love from a recent directory submission.

Furthermore a major event happened earlier this year that was bound to shakeup the Google index. A hitherto major source of high quality authoritative back links was Wikipedia. In a response to search engine spammers and general critics, wikipedia introduced a robots "no follow" tag, and so blocking the search engines from indexing their external links. This meant that the page rank benefit of wikipedia would not carry over to sites it linked to. Perhaps this can also explain the 'burying' of sites that myself and others have experienced.

If your top rankings have been affected by the latest algorithm change, do not despair - there are loads of others out there affected too and soon advice will be on hand as to how to claw back lost ground.

A:B Advert Testing – A Cautionary Tale

The conventional wisdom on PPC adverts on Google is that you should look to improve the clickthrough rate, as it is generally accepted that this is an important attribute in the quality score, which determines the amount that you need to bid to get a certain position (or how high up the rankings you appear for your bid, if you prefer).

And this is probably true, and isn’t a bad idea.

But it’s definitely not a good idea to focus on the clickthrough rate to the exclusion of all else. The clickthrough rate is an indication of how interested people are in your advert, but if your advert does not accurately represent the content of your site, you’ll be enticing traffic that doesn’t convert very well, and may be putting off exactly the people that you should be attracting to your website.

This sounds like an easy thing to avoid, but it’s not quite as straightforward as it sounds. Suppose that you are a company that offers free marketing advice via a weekly e-mail that people have to sign up for. Your initial advert may read:

Free Marketing Advice
Get Free Advice From Marketers Inc
Free E-Mails Every Week
MarketersInc.com/Advice

The advert does quite well, and gets conversions occasionally.

But you’re concerned that the second line is a fairly weak call to action, so you decide to try something different.

Free Marketing Advice
Get Free Advice Here!
Free E-Mails Every Week
MarketersInc.com/Advice

You run it for a while, and it doubles the clickthrough rate, so within a day or two you bin the old advert and go forward with the new one.

Then you look at the third line. It doesn’t really extol the benefits of the e-mails, so you try another line.

Free Marketing Advice
Get Free Advice Here!
Learn The Tricks Of The Trade
MarketersInc.com/Advice

Even better clickthrough rates, so you keep this one.

But the changes in the second line may lead people to believe that there is free information on your website, rather than from a marketing company. Whilst you’ll get more traffic to your site, it’ll be of poorer quality. And the change to the third line reinforces this.

But surely you’ll see a fall-off in the conversion rates, and keep the old adverts?

Not if you’re changing your adverts as soon as one appears significantly better than the other, based on clickthrough rates.

Suppose that the campaign above starts out with a clickthrough rate of 3%, then increases to 6% and 8%.

At the same time, the conversion rate falls from 10% to 7% to 4%. Finally, assume that the cost per click moves from £0.30 to £0.28 to £0.25

If you accept a 90% level of significance, your results look something like this.

Advert      Impressions    Clicks     Cost      Conversions
Advert1:        200              6        £1.80            1
Advert2:        200             12       £3.36            1

Advert2:        600             36      £10.08            3
Advert3:        600             48      £20.00            2

There is no real falloff in the number of conversions, and a significance test of the difference in conversion rates is totally insignificant.

In fact, to get significant results (even at the 90% level) for the conversion rates, you’d need to wait much longer.

Advert      Impressions    Clicks     Cost      Conversions
Advert1:       7650            230     £68.85           23
Advert2:       7650            459    £123.93          32

Advert1:       1650              50     £15.00           5
Advert3:       1650            132     £33.00           5

To put that in context, if you were getting 400 impressions per day, the tests for clickthrough rates would take (1 + 3 =) 4 days, whereas the tests for conversion rates would take (38 + 8 =) 46 days. That’s quite a lot longer.

So, what’s the conclusion here? Should you run your campaigns for ten times as long, to confirm that the new advert doesn’t hit your conversion rates? Bear in mind that the changes above are quite extreme – it’s unlikely that your results will show anything after waiting ten times as long – when do you draw the line, and say that the change is too small to matter?

Even here, we’ve not taken into account the impact of reducing the cost per click (which will slightly offset a reduced conversion rate), or the impact of increasing the total number of conversions (even at a slightly higher cost per conversion, this could still be a good thing).

Alternatively, should you just ignore the conversion rate, and hope for the best? Or try very hard not to change the meaning of the advert? You only need to write one bad advert to wreck your campaign.

Perhaps the best approach is to physically look at the conversion rates of the adverts that you are dropping – if they are lower, then ask the question “have I caused this to happen?” The fewer conversions that you are getting, the harder it’ll be to stop a problem – so monitor the conversion rate, and if it starts to drop, check to see if you’re the cause.

Optimisation for AdWords

Google have posted their second part of the following article:

AdWords Optimisation

Following on from their comments I just want to add that optimising AdWords is simply not a case of tweaking adverts and bids to get cheaper traffic. Sure its a major part of the ongoing work but the real magic happens at the business end, your website!

If you have a conversion rate of 0.5%, then regardless of how much your traffic costs, if you can make a few shrewd changes to your site and increase conversions by another 0.5%, then you just doubled your enquiry/sales rate.

Imagine if you could increase it by 3 or 4 percent extra, thats when your campaigns really start to fly. Far too often advertisers forget the importance of a solid landing page with good calls to action and a straightforward enquiry / buying process.

Most of your visitors are lost sales because of 3 things:

1. Your advert took them to a page that does not talk about the product or service you advertised.
2. You forgot to ask for their business! They shouldn't have to hunt around or scroll down the page to move to the next stage, they should easily be able to see multiple calls to action.
3. Your checkout process or enquiry form is simply confusing.

Spend some time on these 3 areas and see how your campaign is transformed beyond where you thought it could be.

The Google Gap!

In the UK Google represents more than 80% of all searches performed according to the stats we see across a wide customer base. MSN and Yahoo are fighting it out for less than 5% but can they close the Gap?

Over the past 12 months its become increasingly difficult to get great results in seriously competitive markets like finance and travel through Google AdWords campaigns. More advertisers means higher costs per click and therefore more expensive enquiries. But are things set to change?

Until recently, the high quality enquiries and sheer volume have been attached to Google searches but there have been some developments that may change this.

Microsoft have launched Live.com, their new search engine along with AdCenter, there new back end advert management system set to rival Google. Previously this was powered by Yahoo based technology which did not reward how well your advert is received and therefore was not as popular as Google.

Yahoo! this week have also launched "Panama", their new system, designed to work much more like Googles. With competition being so fierce on Googles network, this is sure to spark interest from agencies trying to squeeze more profit out of their clients budgets.

One other HUGE factor in Googles UK dominance will be Windows Vista. This new operating system from Microsoft has started rolling out this month and with it their search engine, live.com, will doubtlessly be embedded in most of the standard applications like Word, Excel etc.

This means that millions of people will have quicker, easier access to Microsoft's search engine. If you are writing an article in Word and want to get some stats from the Internet, are you going to search from Live.com that is built into Word or go the long way round and leave Word, find Internet Explorer, power up Google and then Search? I think this will result in a large chunk of Googles market share disappearing over night.

The next six months are going to be truly monumental for search dominance and I'm looking forward to it. Competition is a good thing and hopefully we can get a little more bang for our buck!

Multivariate Testing On PPC Adverts

When most experts talk about testing adverts on Google Adwords, they recommend that you change only one thing in the advert, so that your results aren’t confused by conflicting changes (if one change improves your clickthrough rate, and one makes it worse, then the overall impact could be better or worse, and you’ve no idea what worked at what didn’t).

And that’s all ducky. But it assumes that the lines of your advert work independently of each other. What happens if this isn’t the case.

Consider the two adverts below:

A)

ABC Mortgages

Free Advice And Valuations

Competitive Rates

Suppose that you’ve been running A) for a while, and try a new third line “Quick And Friendly Service”:

B)

ABC Mortgages

Free Advice And Valuations

Quick And Friendly Service

You get the following results:

A)      10000 impressions, 1000 clicks, clickthrough rate = 10%

B)      10000 impressions, 800 clicks, clickthrough rate = 8%

So you keep advert A)

Then you try it against another advert, with a second line of “Your Local Mortgage Broker”:

C)

ABC Mortgages

Your Local Mortgage Broker

Competitive Rates

You get the following results:

A)      10000 impressions, 1000 clicks, clickthrough rate = 10%

C)   10000 impressions, 800 clicks, clickthrough rate = 8%

Again, you keep advert A).

But have you missed something here? We’ve no idea if advert A) is better than an advert with both changes:

D)

ABC Mortgages

Your Local Mortgage Broker

Quick And Friendly Service

It’s quite possible that the two new lines work well together, as they have a similar tone. This being the case, you could potentially get the following results:

A)      10000 impressions, 1000 clicks, clickthrough rate 10%

D)      10000 impressions, 1200 clicks, clickthrough rate 12%

This is quite possible, but you can’t run this test instead of the others, in case one of the lines was better, and the other worse. And if you run it as well as the others, it feels a bit like you’re wasting time. And if you wanted to try varying all three lines, you’d need to run seven different tests, instead of just three.

In principle, the solution is quite simple. There’s an easy way to test your three adverts in the time of two tests, or if you are changing all three lines, eight tests in the time it would take to run four tests:

Simultaneously, run all possible combinations of the adverts against each other at once.

The above tests ran for a total of 20,000 impressions each, but how many impressions would it take to get the best of the four options?

Only 40,000 impressions, because you don’t need to waste 50% of your impressions on the control, only 25%. This is the same amount of time that you’d have spent just testing A against B and A against C.

So your results would have looked something like:

A)      10000 impressions, 1000 clicks, clickthrough rate 10%

B)      10000 impressions, 800 clicks, clickthrough rate 8%

C)      10000 impressions, 800 clicks, clickthrough rate 8%

D)      10000 impressions, 1200 clicks, clickthrough rate 12%

In fact, you can save a bit more time by ditching one of the adverts early on, if it’s clearly not going to be the best.

So perhaps testing one change at a time isn’t necessarily the best idea – the stronger the synergy between the lines of your advert, the more likely you are to miss positive changes.

However, there is a price to pay for this approach (isn’t there always?). The test is slightly more likely to come up with the wrong answer (it’s slightly less significant), so you’ll probably want to run it a little bit longer to get the same degree of confidence in your results.

In summary, if you think there’s likely to be a strong synergy between two lines of your advert, it’s worth testing all four combinations of the two lines at the same time. If there’s no reason to believe that the two new lines work particularly well together, but poorly individually, then there’s no benefit to running the four options at once, and you should run two a:b tests as usual.

For example, if you have the advert:

Dave’s Confectionary

Buy Our Chocolates!

Free Next Day Delivery

And you want to try a second line of “Get Luxury Chocolates Here!”, and/or a third line of “Gift Wrapping Available”, you have to decide whether these lines are likely to complement each other, but are unremarkable individually. Here, it looks like the lines are pretty much unrelated, with one being an alternative call to action, and the other suggesting a different feature. So two standard (one change) a:b tests would be quicker or more reliable (depending on how long you wait for your results) than running all four possibilities together.

Any comments? Disagree? Let me know…

For further Adwords information, you can always read the official Adwords Blog.

Google Adwords Blog

Google Maps in Search Results

Around August last year Google began testing a new feature in search results. This was to place map drop downs for businesses and places underneath the natural listing:

This map can be expanded to show an overview of the area:

At first this seems to have been a rare and random appearance but now it seems to be almost a common feature in most generic searches. So far it only seems to list American businesses and the selection of who gets a map seems to be completely random, however it seems you need to be listed in Google’s local directory to be eligible for a map.

Google is constantly testing new ways to improve its user’s experience, these maps look to have become a useful and permanent feature of search results and hopefully will soon be rolled out across UK businesses.