Adrank and Quality score explained by Google

Google has released an updated video on the AdWords auction and Ad Rank, the scoring system used in each auction that determines the order in which ads appear.

Chief Economist at Google, Hal Varian explains the AdWords auction since Google changes the formula to factor in the use of ad extensions and formats.

Varian’s Ad Rank formula visual now includes “Format Impact”. Varian walks through the factors that go into Ad Rank, how it is calculated and ways advertisers can raise their Ad Rank.

Whenever Google officially communicates information about their various algorithms, for obvious reasons there’s often more going on than meets the eye. I’ll try and share with you my opinion on what you really need to know about Google’s new Quality Score information.

At face value, the new material appeared to be an update of the older stuff, which is Google’s official position relating to how Quality Score results in happy customers, happy advertisers and a happy Google.

However, there was one rather huge change in positioning from previous materials — Google downplayed the importance of Quality Score stating:

Quality Score is a helpful diagnostic tool, not a key performance indicator. […] Your Quality Score is like a warning light in a car’s engine that shows how healthy your ads and keywords are. It’s not meant to be a detailed metric that should be the focus of account management. This just doesn’t add up. We know that Quality Score impacts ad position, impression share and cost-per-click. These metrics, in turn, directly affect the quantity and cost of your conversions. This — combined with the fact that as average Quality Scores have drifted lower over the years, the CPC savings of above-average Quality Score keywords is now worth up to 200% more than it was four years ago – certainly suggests that Quality Score is a key performance indicator.

And don’t take my word for it — in Google’s own 2011 video, “What is AdWords Quality Score and Why Does It Matter?,” Quality Score seemed much more important than a blinking engine light:

Quality Score is important in order for your ads to be successful. However, Quality Score also plays a key role in determining your ad’s position and how much you’ll pay for a click. In general, the more relevant your ad, the higher your Quality Score – and the higher yourQuality Score, the better your position and the less you will have to pay for a click. [...] Being successful with AdWords means getting your products or services in front of the people who are most likely to become your customers, and a high Quality Score can help make that happen.So, the real question to me isn’t whether or not Quality Score is a KPI, but why Google is suddenly reversing course and downplaying Quality Score’s significance.

We know that Quality Score (for both AdWords and Bing Ads) is mostly just a matter of beating the expected click-through rate for a given ad position. Ads that get above average CTRs get higher Quality Scores, and vice versa.

So, Quality Score is graded on a curve. Not everyone can achieve above average Click Through Rate — by definition, half of AdWords advertisers will be below average, and so it’s not possible for everyone to get high Quality Scores.

How Is Quality Score Calculated? One other big change I noticed was around the specific explanation of how Quality Score is calculated. Previously, Google used to say:

Only exact match keyword data on Google Search is used to determine a keyword’s Quality Score. This means clicks happening on phrase or broad match keywords do not factor into QS.However, now Google has added:

Instead of measuring new keywords from scratch, we start with info about related ads and landing pages you already have. If your related keywords, ads and landing pages are in good shape, we’ll probably continue to have a high opinion of them. Always invest in growing your coverage on relevant searches, especially in areas where your ads have the potential to be high quality. So, what does this mean? For starters, it means that they previously omitted key information. My read of this new info is that if your account has above average click-through rates, it will help out new keywords — this is consistent with what I see in the accounts I work on. This implies there are two things that advertisers should be doing:

• Bid on Branded Keywords. One way to raise your overall account CTR is by bidding on branded keywords. We now know that having a higher overall CTR will help with new keyword Quality Score.
• Delete Poor-Quality Keywords. Conversely, it’s worth considering deleting existing, poorly performing keywords. If you don’t, the CTR of your poorer keywords will negatively impact the Quality Scores of new keywords.

Google omitted vital information in their old material, and with fair reason. After all, they have to protect their algorithms to prevent people from gaming the system. However, I personally doubt that they’re giving us the whole story this time, and I’d advise that you do your own research and take Google’s new information with a grain of salt.