Google Ad Rank Calculation Update

This week Google announced a major change to its Ad Rank calculation which is used in determining the position and CPCs paid by each advertiser in the Google ad auction.

 

Historically Ad rank has been calculated by multiplying your Max CPC bid by your Quality Score (Google’s assessment of the relevance of your keywords, ad copies and landing pages). But with this new update Google now also factors in the expected uplift from the ad extensions and extension formats that you are using in your AdWords Campaigns. In addition Google has increased the importance of Ad Rank in determining whether your ad extensions are eligible to be displayed along with your ad. Here are the full details of the update from Google:

 

  • Ad extensions and formats can now influence the position of your ad on the search results page. If two competing ads have the same bid and quality, then the ad with the more positive expected impact from extensions will generally appear in a higher position than the other.
  • When estimating the expected impact of extensions and ad formats, we consider such factors as the relevance, clickthrough rates, and the prominence of the extensions or formats on the search results page.
  • Because Ad Rank is now more important in determining whether your ad is shown with extensions and formats, you might need to increase your Quality Score, bid, or both for extensions and formats to appear.
  • In each auction, we’ll generally show your highest performing and most useful combination of extensions and formats among those eligible. So there’s no need to try to guess which extensions will help improve your clickthrough rate the most.
  • You may see lower or higher average CPCs in your account. You may see lower CPCs if your extensions and formats are highly relevant, and we expect a large positive performance impact relative to other competitors in the auction. In other cases, you may see higher CPCs because of an improvement in ad position or increased competition from other ads with a high expected impact from formats.
  • For now, this update only affects search ads appearing on Google Search.

 

Why has Google made this change?

It has been widely known that Ad extensions typically improve CTR which means more ad clicks and more revenue for Google. By making ad extensions a key component in the Ad rank calculation this will likely further encourage advertisers to take advantage of more of these Google features within AdWords.

 

Also as ad extensions generally only appear for ads in the top 3 positions in the SERPs it is likely that advertisers will compete more aggressively for these top positions in order to see the additional benefits that ad extensions bring to Ad rank which would ultimately mean increasing overall market CPCs.

 

What does this change mean for advertisers?

The Use of ad extensions will now be more important than ever. To ensure advertisers are getting the best position and lowest CPCs for their max bid they will have to ensure they are using the most relevant combination of ad extensions for each keyword, location, device and time of day. With ad rank now being dependant on the actual performance of these extensions, not just whether they exist, this gives advertisers another element to optimise in addition to ad copies, keywords and max bids which will give an advantage to performance orientated paid search agencies.

 

The changes will likely have a bigger impact for clients with a high reliance on mobile activity as ad extensions on mobile devices (location extensions, call extensions as well as sitelinks) provide a method of getting mobile users the content or information they want fast. Advertisers not utilising these features will likely see a drop in average position and/or increase in CPCs as a result of the Ad Rank update.

 

The changes will also mean that some businesses will need to make changes to their web design in order to avoid being penalised by this update.

 

E.g. Small businesses that have a website with only one or two landing pages will not be able to fully use sitelinks extensions unless they create more landing pages (Google policy states each sitelink must go to a different landing page)

 

Top Tips/ Recommendations

  • Ensure that you are eligible to use as many types of Google’s ad extension formats that are relevant for your business as possible. E.g. Sitelinks – Requires 1 unique landing page per sitelink
  • Location extensions – Include location information next to your ads via a  Google places account or by enter addresses manually in AdWords
  • Social Extensions – Does your business have a Google+ page linked to their website?
  • Call Extensions – Do you have a phone number that customers can call your business on?
  • Offer Extensions – Can you provide an exclusive offer that can be redeemed online or in store?
  • Review Extensions – Show accolades from reputable third parties below your ads
  • Analyse the historical performance of the extensions formats you are currently running to identify which formats perform the best by keyword category, device, location, time of day etc. Ensure coverage of your best performing extensions is maximised and increase relevancy where possible – E.g. Improve sitelink relevance by using ad group level sitelinks and use sitelink description lines, ensure offers and promotions are kept up to date
  • Look at which of the other available extension formats can be displayed in the SERPS in addition to your current best performing extensions and add these into your campaigns. For example call extensions, location extensions, social extensions and review extensions can all be displayed in addition to sitelinks in the SERPS so will likely have a positive impact on your Ad Rank. Google states that the ad platform will generally show your highest performing and most useful combination of extensions and formats among those eligible. So one option is to upload all extension types available and let Google pick the best ones. However how effective Google will be at picking the best extensions is yet to be seen
  •  Use device preference and scheduling on extensions to further increase relevance. E.g. scheduling call extensions for call centre opening hours, schedule offers between the start and end date
  • Look at what ad extensions and formats your competitors are using and how you can improve upon and differentiate your ad extensions to give you the advantage
  • Monitor changes in ad position and average CPC as a result of implementing different extension formats to see which are the most beneficial to Ad Rank for your activity
  • Monitor changes in ad position and average CPC as a result of implementing different extension formats to see which are the most beneficial to Ad Rank for your activity
  • Expect this to rollout across Display in the near future so start testing ad extensions and formats in Display now

 

This is clearly an important change from Google Adwords and brands should certainly take note.  Please get in touch if we can help .