The Adwords team announced today that over the next few weeks they’ll be rolling out changes to the formula in their Adwords tool that dictates who gets the top spot in the sponsored listings on the search engine results page (SERP).
Today, the top spot is determined by a combination of quality score and actual cost-per-click (CPC). The new formula will be a combination of Quality Score and an ad’s maximum CPC. Here’s Google’s explanation as to why that’s a good thing:
Actual CPC is determined, in part, by the bidding behavior of the advertisers below you. This means that your ad’s chance of being promoted to a top spot could be constrained by a factor you cannot influence. By considering your ad’s maximum CPC, a value you set, you will have more control over achieving top ad placement.
I don’t like this for small businesses who do a better job of optimizing their campaigns to perform better than those of their larger business competitors. I notice alot of larger business campaigns put alot of money in, but just let the campaigns run without tweaking and making them better. I think this new formula will allow the larger businesses to dump more dollars in and overtake the top spot without spending the time to make the experience better for the user.
Maybe it’s just the wording of their release, but my first reaction to this news is that Google is saying you’ll need to dish out more to hit the top spots.
Tags: Google Adwords
I agree with you, Patrick. That’s what it sounds like to me, as well. The more money you spend, the better you ad will run, regardless of how much effort you put into tweaking the wording and keyword choices.
Unless we’re both misunderstanding this, it sounds like the new formula is essentially about rewarding whoever is willing to pay the most money. I guess that makes sense for Google’s bottom line, but it sucks for small business marketers.
It also sucks for Google users, in my opinion, because now they will be getting ads that may not be as relevant as others, but will be showing up higher because that company can afford to dump for dollars into their AdWords campaign.
[…] The Lonely Marketer posted on this subject last night. Their first reaction was that this is another attempt by Google to ensure that “you’ll need to dish out more to hit the top spots.” While my gut tells me that this is more along the lines of an algorithmic, ad quality shift, I can’t help but agree with The Lonely Marketer on this. In the old model (actual CPC), advertisers were saving money by maxing out their position with a lower CPC. The new model gives Google license to charge you for each click at the maximum CPC under the guise of improving user quality and ad rank. […]
Hey Adam,
There is always the possibility that the release was just poorly worded, but it seems pretty obvious to me. I’m meeting with my Google reps at SES San Jose and am planning to discuss this with them. I’ll let you know what they say.
I agree 100% Patrick - This is great for large corporations and professional marketing outfits (large affiliates)…bad for the small guy.
Hey Jeff,
Yeah, I’m still leaning that way. I’ve read some responses by Google over the last couple of days, but I’m still thinking this just became more about the money.
PS…I was reading your ‘About’ page and noticed you just moved to Minneapolis. Welcome! If you’re interested, there is a group on Facebook that was just started for Minnesota SEM/SEO professionals.
Thanks Patrick - definitely enjoying Minneapolis. I’ll keep an eye out for you at the next MIMA event.
Let’s hope this isn’t Google’s reaction to a stagnating paid search market. I tend to agree that small business optimizes ads better for reduced spend, but there is another huge market segment that will be hurt by a significant algo shift, and that’s the affiliate market.
Garry,
Great point! Your post spells it out nicely. I hadn’t considered the affect on the affiliates. Do most affiliates bid to the top? I’m no expert on affiliate marketing, but I have dabbled in buying low clicks and driving them to various sites with ads. I’m usually jockeying for the lower end of the SERP. Do most affiliates try for the higher spots? Just curious….
Thanks for visiting, Garry.
Pat
Pat,
Most affiliates aim for top PPC placements because the volume is there to drive revenue and commissions to offset their costs (and then some). Those that take time to be the best also consider SEO for tops in the organic SERPs, but that’s mostly impossible for the majority.
In some industries it’s not uncommon for more than 50% of sales to come from the affiliate channel - companies giving up as much as 80% of their revenue. If the algo change is considerable, larger companies with existing affiliate programs and their own PPC campaigns will be licking their chops to take back the paid search market.
I really doubt Google would want that in the end, as they only just started their own PPA programs in Adsense.
Fingers crossed, we all use affiliate programs in some sense.
Garry
Garry,
Thanks for the follow-up and great information. I’m getting more and more interested in affiliate marketing.
Google typically has some sort of strategy with their announcements and since this is so close to SES San Jose next week, I bet they come out with more information on the algo. I’m meeting with my Google reps while there so I’ll ask them for more detailed information as well. Hopefully, I’ll have something to pass on.
Thanks again, Garry!
Pat
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