Tonight the Inside AdWords blog announced that Google is going to change the ad placement algorithm, replacing actual CPC as a factor with maximum CPC.
How does this affect advertisers? Well, by Google’s estimation, this is a GOOD thing for advertisers:
Actual CPC is determined, in part, by the bidding behavior of the advertisers below you. This means that your ad’s chance of being promoted to a top spot could be constrained by a factor you cannot influence. By considering your ad’s maximum CPC, a value you set, you will have more control over achieving top ad placement.
In addition to increasing control for advertisers, the improved formula increases the quality of our top ads for users. This is due to more high quality ads becoming eligible for top placement, thereby allowing our system to choose from a larger pool of high quality ads to show our users.
But the question remains, how MUCH will max CPC affect the ranking versus quality score? While quality score does have some impact on ranking today, most of my testing has shown that quality score has had less to do with ad ranking and more to do with how the max CPC is established. For instance, in one client’s case, by improving the quality of ad copy, our max CPC dropped from $5/click to $1/click, but the position remained relatively the same.
If indeed the quality score plays a major role in ad ranking, then this change may not affect many advertisers. BUT, if max CPC plays a major role in ad ranking (and we’ve seen CPC has done so to date), then the advertisers that lose are the small businesses, as they can be easily outbid by larger advertisers. At least quality score, if it were a major factor in ad ranking, might help level the playing field.
But what is Google’s main motivation here? To help advertisers? To serve better ads? Not in my estimation. Could this change have anything to do with the fact that Google last month announced that its Q2 earnings only saw a 58% increase over Q1. You bet it does. As a public company, Google’s been a Wall Street darling, and like a recording artist with a string of #1 hits, the pressure is on to continue to perform at peak levels. That demand will continue to cause Google to make decisions that may not always be completely beneficial to its advertisers or searchers. I guess that’s just business.