The Google eCPM Game – The Importance of Ad Rank Reviewed by Momizat on . Google Makes Changes to Ad Rank Calculations This week the big change in the AdWord's world was Google announcing it changed how they calculate ad rank. There h Google Makes Changes to Ad Rank Calculations This week the big change in the AdWord's world was Google announcing it changed how they calculate ad rank. There h Rating: 0
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The Google eCPM Game – The Importance of Ad Rank

The Google eCPM Game – The Importance of Ad Rank

Google Makes Changes to Ad Rank Calculations

This week the big change in the AdWord’s world was Google announcing it changed how they calculate ad rank. There has been a lot of coverage on this change, including Search Engine Land, Search Engine Watch and even a post from Wordstream on “what the change means”. I am really not going to focus much on how this impacts search marketers right now but, really give some background and a reason for pretty much every change Google makes to the AdWords program.

Why does Google make changes?

If you ask Google, the usual response (we’ve all heard), is “To improve the user experience”, “we are improving the relevance for users”, or some other variation of that. The drum they beat goes “most relevant information,” over and over and over again.

Do you really buy that though?

If you do, you need to remember one thing-

Google is a BUSINESS!!!

They care about their revenue, profit, and pleasing share holders. Every thing they do, eventually fuels them making money off of… advertising. Can you honestly get mad at a business for wanting to make more profit?

So why the change to Ad Rank?

Let’s start with a quote directly from the source:

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.

Why did I bold part of that sentence? What could be considered a more positive expected impact? The extension with the most “relevant information” for the user? The extensions which would answer the search query best? Which extensions would make the SERP prettiest, or take up the most room? Of course not! It’s about which extensions raise the average CTR of the ad they are attached to. The advertiser which has the extensions which will help create the most clicks will get a better Ad Rank, because that ad will make Google more money in the long run.

Google’s Ad Rank calculation for all intents and purposes was a shiny way for them to say, “which ever ad will make us the most money should have the best position”. Quality Score boiled down is CTR or which keyword and ad combination will potentially earn Google the most moolah.

You say CPC… I say eCPM

Remember everything Google does on the SERP is to try and get the most money out of every single search results page they serve. They use a calculation some AdSense publishers may recognize as eCPM. It is the effective cost per mille (thousand). Basically how much revenue a publisher gets for every thousand pages or impressions they serve. SEMPO says it this way:

a hybrid Cost-Per-Click (CPC) auction calculated by multiplying the CPC times the click-through rate (CTR), and multiplying that by one thousand. (Represented by: (CPC x CTR) x 1000 = eCPM.) This monetization model is used by Google to rank site-targeted CPM ads (in the Google content network) against keyword-targeted CPC ads (Google AdWords PPC) in their hybrid auction.

I say it a different way:

Google eCPM Calculation

To help you better understand let us look at a column most advertisers over look in AdWords – the Avg CPM column.

AdWords-Avg-CPM-Column

Have you ever wondered why it was there for your Search Campaigns? Do you ever say “Holy Crap! My average CPM on search is over $100. I really need to change my bids”? Of course you don’t! But it is there, because it’s a calculation Google does already. They know what your eCPM is for each keyword and ad copy combination and give you a cool number called a Quality Score. The higher the eCPM of your keyword and ad copy combinations compared to other advertisers the better your “Quality Score”.

The Bottom Line

Well the bottom line for the this change (or any for that matter) is to improve the… bottom line for Google. This is Google taking into account more factors when determining which ads to show in which position to help the monetize best the SERP. Who will give them the best eCPM?

What is your opinion on this?

About The Author

Enterprise PPC Management Executive

Bryant is a seasoned Paid Search Executive. Known by many as the Dr House of PPC, he specializes in consulting with Start-ups and Fortune 1000 companies on their Paid Media endeavors. He has consulted with companies from Choice Hotels & Greendot to start ups like Palo Alto Networks. When he isn't busy rocking PPC, blogging, or tweeting, you will usually find him having fun with his wife & 4 kids. Connect with Bryant on - Google+ LinkedIn Twitter

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