Lower CPC and better Google Ad positioning: the key is in the Quality Score
Google Adwords uses a metric called 'Quality Score' to measure the relevance of your ad to each keyword search you're hoping to appear on. The Quality Score is what differentiates buying an ad on Google from buying an ad in an auction. It punishes shady advertisers and rewards relevant and appropriate ad campaigns.
What is the Quality Score based on?
While Google is not 100% clear about what exactly goes into the Quality Score, they do give us a good idea of the most important variables:
CTR is by far the biggest variable in determining your Quality Score. It seems they feel that their collective users should be the first people to judge (by choosing whether or not to click) if an ad should be rewarded with a high Quality Score or punished and have to pay more.
Google looks at the previous CTR for this specific keyword (usually judged after around 10,000 impressions), the ad group and campaign, and even previous CTRs for the overall Adwords account.
For text ads, it's important to create separate ads for separate groups of keywords so that the wording relates and positively affects your Quality Score.
The ad landing page's copy can also affect the quality score, particularly with display content network ads that don't have any text to work with. Landing pages need to load quickly, have relevant content and clear privacy policies to constructively impact your Quality Score.
How does the Quality Score affect an Ad's position?
To answer that question, let's go over some ad-placement information:
- If your ad isn't being displayed on the first page of keyword search results, it increasingly might as well not be showing up at all.
- Where your ad is displayed is based on its Ad Rank.
- The higher an ad rank, the higher the ad positioning.
The formula for Google's Ad Rank is basically:
Ad Rank = Quality Score * Max CPC bid
So your ad's Quality Score is just as important in determining where your ad is placed as how much you're willing to pay.
For example, imagine that You and 3 other people are fighting for an ad placement next to the keyword "Chewbacca." The following is a chart of your Quality Scores and Maximum CPC.
You can see that using the formula for Ad Rank, you edged out Biggs for the first Ad Position by having a higher Quality Score even though Biggs was willing to spend $2 more per click.
How does the Quality Score affect an Ad's CPC?
Google describes its CPC pricing model as "[giving] you the lowest possible price in order for you to maintain your ad's position."
The more exact formula for your actual CPC is:
Actual CPC = (Ad Rank to beat / Quality Score) + 1 cent.
Looking at the same battle for the Chewbacca keyword,
you'll notice that You have secured the number one ad position while paying nearly a dollar less than Biggs did for ad position #2. This is a direct result of your higher Quality Score. If you look at the chart below, you'll see how your actual CPC drops even lower as Quality Score increases (keeping all other variables the same).
The End Result
The Quality Score is Google's way of preventing an advertiser with too much money from simply buying any keyword he wants and also rewarding good, relevant advertising through discounts and better ad placements. By acknowledging how the Quality Score is calculated and creating campaigns accordingly, you can be one of the ones paying less per-click.
What other ways are there to improve your Quality Score? What else should people be looking out for?