Two weeks ago, Google announced that they were set to change the ranking formula for top ad placement. Initially, I had mixed opinions on the subject and was unsure if the motives behind the change were for quality or for Google’s financial gain. Bloggers across the board wrote on the subject and had theory after theory of what was Google’s “true” intent. Instead of posting further hearsay, the team here at PPC Hero contacted our trusty Google reps to get to the bottom of this update! After numerous discussions with our reps, and discussions with our team, we made a few discoveries. First of all, the confusion surrounding this change stems from a misunderstanding of the current formula for ad rank. In all reality, the two are not that different. Here’s a side by side comparison:

 New Top Ad Placement Formula Old Top Ad Placement Formula Rankings Formula: Quality Score X Maximum Bid = Ad Rank (raw number, not actual ranking) Rankings Formula: Quality Score X Maximum Bid = Ad Rank (raw number, not actual ranking) Highest ad rank gets #1 spot, 2nd highest gets #2 spot, etc. Highest ad rank gets #1 spot, 2nd highest gets #2 spot, etc. Actual CPC is determined by adding \$0.01 to the actual CPC of the advertiser immediately below you Actual CPC is determined by adding \$0.01 to the actual CPC of the advertiser immediately below you If ads in the top 1-3 positions meet a minimum threshold for quality score and minimum price, they are then sent to a human editor If ads in the top 1-3 positions meet a minimum threshold for quality score and minimum price, they are then sent to a human editor If they are approved by that human editor (quality), then they move to the left hand side If they are approved by that human editor (quality), then they move to the left hand side N/A At this point, the rankings of the top 1-3 ads are then determined by a second ad rank formula of Quality Score X Actual CPC (not maximum) = Ad Rank (still a raw number, not actual ranking) N/A The rankings are re-ordered (if necessary) All ads, on the left and right sides, are then displayed in the SERPs All ads, on the left and right sides, are then displayed in the SERPs

As you can see, the basics of the Google Ad Rank formula will remain the same. What has changed is the promotion of ads from the right hand column of ads to the coveted top three spots on the left. To help ease your minds, think of this shift as a change in “promotion formula.”

• Old Promotion Formula:
• Quality Score X Actual CPC > Threshold Value
• With this current formula, some high quality ads cannot be promoted to the top ad placement because the advertisers below them are not bidding very much.
• New Promotion Formula:
• Quality Score X Maximum CPC > Threshold Value
• An example of where this can help advertisers is when you are the only ad displaying on the page but are displayed on the right side of the SERPs. Since the new promotion formula uses your max CPC instead of your ultra-low actual CPC, you would then qualify to be moved to the top ad spots.
• In both instances, Quality Score is still weighted to reward high quality ads.

All of this information was presented in the AdWords help section, though it was vague and a little loose on the details. Though, after discussing this formula change with our Google reps, we feel at peace with the information. We were told that there is a definitive list of AdWords accounts that will see an obvious change in performance. If you have any questions or concerns regarding the accounts you manage, take the time to call your representatives for clarification. Now that this update is live within AdWords, I will take a look at a few of my campaigns to see how (or if) my performance has been affected. Check back next week for an update with numbers!