<strong>How Your Google Adwords Quality Score Can Reduce The Amount You Pay Per Click</stro
How exactly does Google calculate the actual amount you pay per click on Google Adwords? An explanation of what a Google Quality Score is, and why having a big one can reduce the amount you pay per click with Google Adwords.
Google Adwords is an auction based Pay Per Click (PPC) advertising system where you as a PPC advertiser set the maximum amount you are happy to pay for each click you receive from your advertisement placed with Google.
As an Adwords advertiser you compete in a real-time auction every time a keyword triggers your ad. Adwords is a 'Vickery' type auction. In a Vickery auction once a winner has been decided, the actual price paid is not the maximum amount bid, it is one penny more than the bid of the second highest bidder. Google Adwords adds a twist to this, as winning bidders are also determined by Ad Rank not by maximum bid.
An understanding of the way that Google Adwords ranks PPC bidders to determine who has won each of the real-time auctions is essential to establishing a consistent and profitable strategy when taking part in the Google Adwords PPC Programme.
The Google Adwords Quality Score
The Google Adwords system for determining who wins the PPC auction is based upon the belief that high quality ad creatives benefit all parties involved. When the ads that Google displays match the requirments of searchers the assertion is that this benefits advertisers, searchers, publishers and Google alike. They name this 'relevancy'.
Since the winning bidder gets the highest position and the highest position gets the most clicks, the goal for you as a Google advertiser is to get the highest position for your advert creative at the lowest possible cost per click (CPC).
Every time a search is prompted and an auction has taken place, Google ranks the triggered ads by 'Ad Rank'. The position of each ad is based upon its 'Ad Rank'
Ad Rank = 'Maximum Cost Per Click' x 'Quality Score'
Since the 'Ad Rank' is not just the maximum amount that an advertiser has bid the highest bidder does not always win. The winning bid is based upon an additional set of elements, which together make up the Google Quality Score.
The Quality Score is the basis upon which Google assesses and measures the relevancy of your ad to users and has a major effect in deciding how much you actually pay per click. This means that to compete efficiently an Adwords advertiser must be aware of what they have to do to achieve a high Google quality score.
Exactly how Google calculates the Quality Score is unknown to us and is a closely guarded secret.
Google do tell us however that Quality Score is determined by a keyword's clickthrough rate (CTR), the relevance of text in the ad, the historical performance of that keyword and other relevancy factors including the landing page of the target url.
The Google Quality Score & Cost Per Click (CPC)
Typically the higher an ad's Quality Score, the more relevant it is for the keywords to which it is tied to. When ads are highly relevant to the searcher they tend to earn more clicks and as a result achieve a higher clickthrough rate (CTR). This tells Google that users are finding the ad relevant and clicking on it to find out more. A higher CTR will increase a keyword's Quality Score which in turn increases the Ad Rank. As a PPC advertiser this means that you can maintain or increase your position whilst lowering the actual cost per click that you pay.
Furthermore Google stops displaying ads for keywords that have a low Quality Score. If an ad has a low Quality Score on a certain keyword it means that users are not finding that ad relevant to their needs and Google will disable the keyword by making it inactive.
A Practical Example Of How The Google Quality Score Works
The PPC bidding system that Google Adwords operates is a complicated one because we can never fully be sure of the Quality Score of competitive bids.
Making assumptions about the Google Quality Score, here is an example of how the Google Adwords system would decide who wins a PPC auction and how much they would pay per click.
I've used 5 PPC bidders to display how it works but in reality there will be many, many more bidders involved in each PPC auction.
The column titled 'Actual CPC' in the table below shows how much each Adwords bidder would pay for their click following that particular auction.
Quality Score Maximum CPC Ad Rank Actual CPC
Noddy 3 £0.55 1.7 £0.34
Big Ears 1 £1.00 1.0 £0.81
PC Plod 1 £0.80 0.8 £0.41
Bill 2 £0.20 0.4 £0.11
Ben 1 £0.20 0.2 £0.01
To calculate how much each bidder pays, Google first calculates the Ad Rank for each PPC bidder. The Ad Rank is Google's Quality Score multiplied by the Maximum CPC. In the table above we've ranked the ads by their Ad Rank and we can see that Noddy has won this PPC auction and his ad will be in top position in the search engine results.
Noddy was prepared to pay Google up to a maximum of £0.55 per click but he only needs to pay 1p more than would be necessary to keep his Ad Rank above the next highest ranked bidder - £0.34. The calculation is:
'Actual CPC' = ('Ad Rank of Next Highest Bidder' / 'Quality Score of Winning Bidder') + 1p
Which in our case is:
('Big Ears Ad Rank' / 'Noddy's Quality Score') + 1p
= £0.34p
The same logic is applied to each bidder in the list, Big Ears and PC Plod, then Bill and Ben.
In the example above you can see that because Google is rewarding Noddy because his ad is relevant, he is actually paying a lot less per click than his competitors Big Ears and PC Plod.
Using this formula, if all other factors remained constant, Big Ears would have to pay a wmassive £1.66 per click if he wanted to move up to a postion above Noddy.
As you can see from this example any PPC advertiser that does not understand the theory of Quality Score runs the risk of paying heavily for their ignorance.
Sayu Ltd. specialise in pay per click management services. By utilising advanced statistical techniques, long tail marketing and proprietary automated bidding software we can reduce overall advertising spend and increase the quantity and quality of traffic that is provided by a client's internet advertising campaigns. For more information, please see www.sayu.co.uk You may also be interested in our recent White Paper titled Google Adwords: Using the Long Tail to Optimize your Google Adwords ROI. This explains how long tail marketing techniques can receive as much or even more targeted traffic for substantially less money.
Shooting Fish in a Barrel
Shooting Fish in a Barrel: Convincing Clients It's that Easy
Local search tools are evolving rapidly. Yet, business-to-business and business-to-consumer firms are slow to adopt them into their Internet strategy. Search engine marketers, or SEM's, find this frustrating, and for good reason. Nearly 45 percent of all search-engine users utilize search engines to find local products and services. By far, the most-common search phrase is "industry" plus "location." With so few sellers doing local search-engine marketing, new local customers are there for the taking.
Still, lack of knowledge and interest abound. When pursuing new clients, search-marketing firms often will hear:
"We already have somebody who takes care of our Web site."
"We tried buying keywords on Google for a few months, but nothing happened."
"We're sales driven. We don't need Internet leads."
It is not enough for SEM's to know all the latest and greatest techniques and trends. Technical proficiency alone will not convince companies with traditional sales and marketing models to establish new budget categories and launch untested programs. For that to happen, SEM's need to:
Focus the client on local search;
Build interest with local search success stories;
Offer a strategic vision; and
Road map the tactical steps to make the vision a reality.
Focus. The entire universe of SEM can bewilder potential clients, so they often retreat to the certainty of the status quo. But nothing is more certain than cultivating local customers. A client will see the value of local SEM more readily than strategies with less-direct impact on customers.
Build interest. Success stories influence slow adopters: it's one thing to hear bold claims from a vendor; it's another thing to hear about a company who actually achieved double-digit growth with a local search strategy. Effective SEM's overcome skepticism by using well-documented case studies of their best projects.
Offer a vision. SEM's, immersed in their field, sometimes assume the client's level of understanding is better than it actually is. In fact, most companies eagerly seek help in understanding how technology is changing customer behavior. At the strategic level, the SEM must focus on the marketplace, not the technology. For instance, instead of explaining the intricacies of Voice over IP, or VoIP, describe how customers will soon be using cell phones to find products and services. When a company sees where their customers are headed, it will do everything possible to get there first.
Road map. Only when the client sees the "why" of local search should the SEM turn to the "how." This is the time for the SEM to demonstrate precision and technical skill; for example, a detailed explanation of cost and return-on-investment for a paid-search campaign will convince the client local search is meat and potatoes, not pie in the sky.
Clients will partner with SEM's that have compelling vision and technical expertise in equal measure. Make local search central to the vision, describe the new marketplace and show clients step-by-step how to thrive in it. The business will follow.
Top 10 Mistakes Most Companies Make with their Google™ Pay-Per-Click Account Management
Top 10 Mistakes Most
Companies Make with their Google™ Pay-Per-Click Account
Management
Pay-per-click account management (Google™ Adwords or otherwise) is a challenging
role because of the complexity, real-time action, and consistent evolution.
We've all made our mistakes with Google™ Adwords, however, one mistake
could cost you $1000s in higher CPCs (cost-per-clicks) or higher CPA (cost-per- acquisition, meaning the total
Advertising cost to capture each lead or sale.)
Today, I'd like to focus on
the Google™ search network, and the top 10 mistakes companies make. They
are:
1. Bidding for the number 1 position.
2. Solely geo-relating campaigns by Country.
3. Using only broad keyword searches.
4. Excluding the exact keywords in their ad title, copy, and URL.
5. Running only one Ad at a time.
6. Ads set to send visitors to their homepage by default.
7. Oversimplifying the organization of their account structure.
8. Inability to prove or report a return on investment (ROI.)
9. Bidding on high-priced keywords with low CTRs.
10. Under-educating themselves about Google™ Adwords.
Don't worry, help is just below…
How to "Do-it-Yourself" – Fixing a Costly Mistake
Below are 10 ways to increase your Google™ Adwords PPC (pay-per-click) account management
effectiveness, and save your company $1000s.
How will they save you money? The below suggestions (following) will increase your CTRs (clickthrough
ratio) through precise targeting. Accordingly, Google™ rewards a higher CTR by
decreasing your CPC (cost-per-click), resulting in more sales converting for an
overall lower CPA (cost-per- acquisition.)
1."We're number two, we're number two." Depending on the number of Google™ highlighted
"sponsored links" on your SERP (search engine results page), your goal is to
be the highlighted sponsor link (paid Ad) positioned right above the organic
searches (non-paid listing) or the first sponsored link on the right side of
"sponsored links". Stay in the positions of 2 to 5 (which are often more
profitable than number one) or an average position of 2.5.
2. "Local customers."Always try to "geo-relate" your
campaign by city, state/province, or nation. By using the "Location
Targeting Options" for a particular city (or state), you exclude areas of
the state or country that are unlikely to buy your product or service. You
also have the advantage of the city's name (or state's name) appearing below
your ad.
3."Exclude tire kickers." To exclude visitors or searches unlikely to buy your product
or click on your ad, use brackets for exact [keyword] matches or hyphens "-"
to use negative words. Both will help exclude keywords/phrases such as
"free".
4. "The keywords are the key." Always add the keyword
to your Ad's title and copy because the keyword will appear bolded
and say to the searcher, "Click me, I am relevant to what you are looking
for." Additionally, the keywords will increase your Google™ Quality Score,
reducing your minimum CPC to active your keyword.
5. "Let the best Ad win." Did you know you could run multiple Ads at the same time, and for
the same Ad group? By simply adding a new Ad under the "Ad Variations" tab,
you will be able to test what Ad works best for you.
6. "Give them what they want." Save your visitors' time, and ensure they get what they
want, by sending them to the exact page (landing page) that relates to your
Ad's keyword.
7."More specific please." Generally when I create a Google™ Account for a client I have 3
services or products, which I Geo-relate individually for both local
(cities), state, and international. Thus, I usually start off with 9
campaigns, giving each campaign and Ad Group a descriptive name to help me
manage the account without memorizing what each of Ad Groups includes. For
maximum effectiveness, group your keyword list into similar items, either by
product/service line or keyword theme, for example: corporate team building,
team building activity, team building event. You could have 2 to 50 Ad
groups per campaign, and an average total of 100 Ad groups per account
(Google™ maximum.)
8. "Results are the name of the game." To increase and improve your Return on Ad Spend (ROAS),
if you haven't already, I highly recommend installing your Google™
"conversion page code."
9. "Focus and finish." If you implement a more specific pay-per-click account management structure
(suggestion #7 above), you can bid on competitive words by getting higher
CTRs and still get fairly low CPAs. If you still have higher CTRs (greater
than 5%) and your CPAs are high (greater than $20), then delete the keywords
within the Ad groups, use more specific keywords or delete the Ad group
altogether.
10. "Professional help." Without any form of payment from Google™, we recommend you become a Google™
Qualified Adwords Professional by investing 9 to 15 hours at the Google™ Learning Center – home of
the best e-course this author has ever taken. Otherwise hire a Google™
Qualified Adwords Professional to save you the time, money, and frustration.
For the love of the web, I sincerely hope you implement the above 10 pay-per-click account management
suggestions. By doing so you could save 25% to 400% in CPCs and CPAs, while
increasing your leads and clicks by 25% to 200%.
JP Richards is a Google™ Qualified Adwords Professional & Search Engine Optimization (SEO) Consultant
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