What Makes Google AdWords Tick? 2 Quality Score Formulas You Need to Know: Minimum Bids and Ad Position

Today begins PPC Hero’s newest journey into the belly of the PPC beast: Google AdWords Quality Score. This week, we are going to take a much more granular, advanced look at Quality Score. First up? Formulas, of course! Google maintains 4 distinct Quality Score formulas for determining the following: Minimum Bids, Ad Position on Search, Keyword-Targeted Ads on Content and Placement-Targeted Ads on Content. Without further ado, let me walk you through the QS formulas for minimum bids and ad position on Search and I’ll give helpful management tips for each along the way.

Quality Score Formula #1: How does Google calculate minimum bids?

As a quick reminder, what is a minimum bid? Google assigns every keyword in your account a minimum bid, literally the lowest amount you can bid for that keyword. Minimum bids are really the crux of the Quality Score universe. High minimum bids punish irrelevant advertisers and reward those that are super-relevant. But how does Google calculate this minimum bid? Here are the 6 factors you need to know about minimum bids:

• Your keyword’s historical click-through rate (CTR) on Google.
  • Please jot this down – CTR on the search network (i.e. AOL, Ask.com, etc.) is not a factor in your minimum bids. Only the CTR of your ads on Google.com!
• Relevance of your keyword to the ads in that ad group.
  • If I’ve told you once, I’ve told you a thousand times – create tightly themed ad groups and write ads that contain your keywords!
• The quality of your landing page.
  • This is PPC 101. Send your click traffic to relevant landing pages. “Quality” landing pages contain the keywords you’re bidding on and are focused on user experience.
• Account History.
  • Account history is a summarization of the CTR of all ads and keywords in your account. In other words, you don’t have the opportunity to have a couple of low-priority campaigns/ad groups that you don’t optimize. Every piece of your AdWords account is at play – be aware!
• The historical CTR of display URLs in your account.
  • This factor almost seems out of place. The most obvious thought process would be how display URLs can boost CTR by containing keywords, etc. But in truth, this is a very helpful factor. Say that www.Example.com is the display URL for all of your ads and it has a 3% CTR across your account. When you create a new ad group and use the same www.Example.com display URL, your new ad group gets the benefit of that 3% CTR when calculating minimum bids.
• Other relevance factors.
  • Hopefully this frustrates you as much as it frustrates me. Suffice it to say, Google is holding these cards close to their chest. My suggestion to account for “other relevance factors?” Follow the guidelines that they do disclose and in general play by the rules.

Quality Score Formula #2: How does Google calculate ad position?

The formula for ad position is surprisingly less complex then that for minimum bids. However, this doesn’t make it any less confusing. Google has a formula that determines a Quality Score for your ad position. This formula is then plugged into the formula for Ad Rank, which ultimately determines in what position your ad is displayed on Google. Did you catch all of that? Let me slow it down and start with the Quality Score formula for ad position:

• The historical CTR of the ad, display URL and keyword on Google.
  • Much like minimum bids, only the CTR from Google.com is used to determine your Quality Score.
• The relevance of your keyword and ad to the search query.
  • In other words, are you broad matching on searches that don’t match your product or service? Or worse yet, do you have a relevant ad, but are bidding on keywords that are totally unrelated to your product and ad? This piece of the formula is all about ensuring great results for the end users.
• Account History.
  • Once again, the CTR of all ads and keywords in your account are at play. You must be at the top of your game at all times in order to achieve great Quality Scores and high ad positions.
• Other relevance factors.
  • Doh! Same rules apply as above.

Contrary to popular belief, your landing page does not have a direct impact on your ad position. Don’t believe me? “Your landing page quality is not a factor,” thus sayeth Google. Landing pages only have an indirect affect due to your keyword minimum bid Quality Score!

All said and done, by following these guidelines, you’ll achieve a good ad position Quality Score. However, as I said above, this does not actually determine your ad position. Google uses this Quality Score as a factor in the Ad Rank formula. Ad Rank = CPC Bid X Quality Score It’s the combination of your maximum CPC bid and your ad position Quality Score that will ultimately determine whether you get to be #1 or #10!

So, it is my hope that you will now feel a little more confident in your PPC management. Why? Personally, when I understand exactly how things work, I can more easily figure out how to fix and improve things! Minimum bid and ad position Quality Scores are truthfully 2 of the most important factors in your AdWords account. As such, please let me know if you have any questions or discussion points to add. Check back in tomorrow when I’ll be discussing the other 2 Quality Score formulas for Content ads!

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• Learn How Google’s Newest Quality Score Update Will Affect Your Accounts

This entry was posted on Monday, August 4th, 2008 at 8:00 am and is filed under Google AdWords Quality Score. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.