Google AdWords Workshop – Part 3: Quality Score

The following article is part 3 in our series on running your own pay-per-click advertising campaign with the Google AdWords program. If you are new to AdWords, read the introduction here first.

In this post I’ll be explaining the Quality Score system Google uses to evaluate your keywords and regulate the display of your ads. Like campaign structure, understanding the Quality Score system will be crucial to your chances of success with Adwords, so it might pay to review this session if you don’t quite ‘get it’ the first time through.

Here’s how it works . . .

You’ll recall that in the previous post, I described how each Adwords campaign consists of one or more Ad Groups. For each Ad Group, you create one or more ads and select a set of keywords to trigger those ads.

The set-up procedure requires youto set a maximum cost-per-click for the Ad Group as a whole, but you can also nominate cost-per-click settings for individual keywords which differ from the Ad Group setting.

Any keyword that doesn’t have an individual cost-per-click setting will default to the Ad Group setting.

Ad position on Google’s search result page is sold on an auction basis. So your cost-per-click settings constitute bids in that auction.

The higher you bid, the higher your likely position on the search results page amongst competing ads from other advertisers. The higher an ad’s position, the more likely it is to attract user attention and clicks.

However bid amount is not the only factor that determines ad position. The Google brand was built on the fact that their search results were usually more relevant to users than results from other search engines.

So relevancy is prized by Google and they figure that if a user clicks on an Adwords ad, then the user must’ve found the ad to be relevant. Therefore, they equate a high click-thru-rate with strong relevance and vice versa.

High Click-Through-Rate = High Relevance

Remember . . . click-thru-rate refers to the number of clicks your ad receives as a proportion of the total number of times the page carrying the ad is displayed.

At Google, ads with higher click-thru-rates are rewarded with higher positions, at lower cost, than ads with poor click-thru-rates.

High Click-Through-Rate = Higher Ad Position + Lower Cost

To facilitate this, every keyword that you run is assigned a Quality Score which represents Google’s prediction for the future click-thru-rate of ads triggered by that keyword.

Ads are ranked for position on a combination of your maximum bid price and the keyword Quality Score. The two are multiplied together to produce a result known as the Ad Rank for that keyword.

Ad position is then determined by comparing your Ad Rank against your competitor’s Ad Rank. The higher your Ad Rank, the higher your ad position.

Even though the ranking formula uses the maximum amount you’re willing to pay for a click in the calculation of Ad Rank, that doesn’t mean you’ll end up paying that rate for every click.

Google monitors the click-thru-rate performance of both your ad, and your competitor’s ad and automatically charges you the least amount required to maintain your ad position.

Google calls this feature the Adwords Bid Discounter.

To illustrate how this works, imagine for a moment that you’ve set the maximum bid on a keyword to $1 per click and Google assigns that keyword a Quality Score of 9.

That keyword would have an Ad Rank of 9.00.

If your competitor’s Ad Rank for the same keyword is only 6, then your ad will display above his, even though his maximum cost-per-click might be more than yours.

In this scenario, the Bid Discounter makes sure you are only charged 67 cents per click, since that’s the amount required to keep your Ad Rank above the competitor’s Ad Rank and your ad positioned above his.

Note that the competitor in this scenario wouldn’t actually pay his maximum bid of $1.50 either. He will only pay the amount required to keep his Ad Rank above the next competitor below him.

Note that Quality Scores are unique to the context in which each advertiser uses a particular keyword and are based on a number of factors . . . your click-thru-rate with that keyword, the historical performance of the keyword across all advertisers, the relevance of your ad text and several other factors affecting relevancy which Google declines to reveal.

We’ll be looking at each of those factors individually in later posts but what’s important to understand right now is that two advertisers can have different Quality Scores for the same keyword.

The Quality Scores I used just now to demonstrate the mechanics of ad ranking were chosen simply to illustrate how it works but Google does, in fact, use a scoring range of 1 to 10.

Okay, hopefully you’re not too dizzy after that lot, but it’s important to get a good grasp on how Google uses Quality Scores to regulate the display of ads on it’s network.

In the next installment, we’ll take a look at the distribution options available on the Google Network.

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