Raise your bids, please: Google revises AdWords algorithm

AdWords changes rolling out this month may mean advertisers pay higher Cost Per Click (CPC) prices for ads.

Google is revising the threshold for its complicated ad ranking algorithm and what determines which ads are shown, how many ads are shown, where they show and how much advertisers pay per click.

More weight will be given to advertisers’ maximum bids when determining ad position, and to query context when choosing which ads are shown.

Conversely, the importance of other ranking factors (the quality of each ad and landing page, and the expected impact of extensions and other ad formats) will be reduced.

Search query context — where Google can determine whether the search is news-related, for instance, or commercial in nature — now becomes a determining factor in ad rank threshold.

Fewer or more ads will be shown on the search results page based on context — surprisingly, query intent appears not to have been a factor before now.

Maximum bids will also be given more weight based on search query context.

AdWords support pages have not yet been updated to reflect these changes, and Google is yet to announce the changes on its Inside AdWords blog. However, Google has told WPP’S CMI Media that:

“While ad quality continues to play a very important role in the Ad Rank calculation, this particular improvement adjusts the thresholds such that bids may carry a larger weight in Ad Rank than in the past for some queries. You may notice that on these queries, even though you continue to have high keyword Quality Scores, that you experience a change in your core ad metrics.”

The changes to ad rank calculations coincide with recent and related changes to AdWords.

• New keyword bidding suggestions: Google is now showing bid suggestions for various page positions, even when the bid simulator is not available for the keyword yet. This is not yet visible in all AdWords accounts, but is gradually rolling out.
• Enhanced CPC bid caps removed: Google has removed the cap (30% above maximum bid) for enhanced CPC bids.
• AdWords accounts now show past data for keyword Quality Score (data is available going back to January last year).

Why should you care?

Cynics will think this change little more than the machinations of a public company intent on increasing shareholder profit. But there’s a delicate balancing act in squeezing advertisers for more ad dollars while ensuring search engine results remain relevant and useful for consumers.

Get it wrong, and consumers will go to other search engines, and advertisers’ dollars will follow them.

For experienced AdWords marketers, nothing really changes: bids should ultimately be based on ad rank with maximums based on performance to KPIs. But Google is rocking the boat, so don’t expect plain sailing: pay extra attention to bids, bid modifiers, ad rank, Quality Score and budgets.

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