What the New AdWords Ad Rank Algorithm Really Means
The PPC world is abuzz with this week’s announcement that AdWords is introducing a new component to its Ad Rank formula. In the past, an ad’s position was dictated by a combination of two factors, the keyword’s Quality Score and its max CPC bid.
Google has now thrown Ad Extensions into the mix to serve as a tie-breaker of sorts. As Google describes it, “if two competing ads have the same bid and quality, then the ad with the more positive expected impact from extensions will generally appear in a higher position than the other.” This is, by far, the biggest change to Google’s ad rank algorithm since AdWords’ inception over a decade ago (check out our interactive history of AdWords). So let's take a look at what it means.
Why did Google adjust the ad rank algorithm?
For all intents and purposes, the old ad rank formula seemed to be working just fine. So why did Google rock the boat and incorporate yet another factor for advertisers to worry about? I have a few theories:
Google wants to give searchers the best experience possible. Remember, it is the world’s premier search engine because users trust that it will always offer the most relevant, helpful results—for both organic listings and paid ads. To encourage advertisers to adopt a searcher-centric approach, Google emphasizes Quality Score. Now, Google is taking it one step further and pushing advertisers to focus on extensions. No doubt, the incorporation of additional contact information and website links will be beneficial to searchers.
Sneaky as it may be, Google is slowly pushing organic results (read: profitless results) further and further down the SERP. We know that searchers are more likely to click on listings that appear above the fold. By shifting organic listings down, Google is redirecting searchers who typically opt for organic listings toward paid ads. As more advertisers enable ad extensions, the average ad size will become exponentially larger (for those in top positions). These huge, blinged-out ads will detract attention from organic listings and are likely to garner a high click volume. Google is even testing placing huge banner ads at the top of the SERP!
In the past few months, we’ve seen Google experiment with many tactics to de-emphasize SEO. This ad rank change is yet another thorn in the side of SEO enthusiasts.
My final theory: The new ad rank formula will increase competition in the PPC space. For Google, more competition means more revenue. Think about it this way, in order for your ad extensions to be displayed, your ad must appear in one of the top positions—a bit of a Catch 22. In order to develop positive historical data for their extensions, many companies will be clamoring for top spots. To achieve these, they have two options: either raise their bids or boost their Quality Scores. I suspect many advertisers will resort to higher max CPC bids, which is easier and faster than working to raise your Quality Scores.
Has this been Google’s plan all along?
Although advertisers are referring to this as a Google “sneak attack” of sorts, in retrospect it is clear that this plan has been teed up for quite some time.
Throughout the past six months, Google has placed a much greater emphasis on ad extensions. It all started back in February, when Google released major improvements to both Sitelink and Call Extensions. These updates gave advertisers the opportunity to establish extensions at the ad group level, allowing them to truly cater the extensions to their searchers. Along with this, AdWords released more in-depth reporting for extensions, encouraging more advertisers to utilize them.
The next hint came along a month later, when the Google policy team put out a mandate forbidding advertisers from including telephone numbers within their text ads. This forced many account managers to turn to call extensions to ensure that their contact information was readily available to searchers.
As account managers started to get comfortable with basic extensions, Google stepped it up a notch and started experimenting with a number of beta extensions. You may recall advertisers rejoicing at the prospect of Image Extensions, Review Extensions, and Offer Extensions – however, we’re still waiting on Google to make them official and available for everyone.
It’s clear that Google has long been a proponent of implementing extensions, and it’s easy to see why – they reliably increase CTR. (More clicks, more money.) The problem is that advertisers are a little too slow on the uptake. So many of us have neglected to take advantage of these “bells and whistles” that Google got impatient and had to take extreme measures. By incorporating ad extension usage into one of their most impactful calculations, Google is forcing advertisers to implement extensions, or suffer major consequences.
What does this mean for you?
This new Ad Rank calculation has already been implemented and will influence every single account that is opted into the Search Network. Whether you are a paid search expert or a fringe AdWords user, Ad Rank is a critical factor in your paid search success.
If you’re not using extensions right now, it’s time to get busy. The good news is, they require very little set-up time and minimal maintenance. Even better, they are displayed at no additional cost. To get started, head to my Google AdWords Ad Extensions Cheat Sheet.
If you’re already running ad extensions, it doesn’t mean that you’re off the hook. Remember, Google is considering the “expected impact of extensions and ad formats,” meaning that they are assessing the quality of your extensions. To boost Ad Rank, your extensions should be relevant, have strong click-through rates and appear prominently on the SERP. You are one step ahead of many advertisers because you’ve already collected performance data for your existing extensions. Keep up your momentum by optimizing your extensions now.
My parting piece of wisdom is to set up any and all extensions that are relevant to your business. In their announcement, Google explained that they will “generally show your highest performing and most useful combination of extensions and formats among those eligible.” I suspect that the more options you give them, the better off you will be!
No doubt, as SEMs begin to measure the impact of this algorithmic change, we will learn more and more about its impact. Looking forward to hearing how it has affects your accounts. Please, comment below!