Oct 142009

CPCs & Average Position Subtleties

Q: Why is my average position lower on the page, even though my average CPC is higher?

We’ve been asked this question a few times recently, and, since the immediate answer isn’t intuitive, we thought we’d clarify.

Occasionally, an increase in a term’s average CPC can occur simultaneously with a decrease in average position. This seems counterintuitive. Why would higher CPCs mean lower page positions? If the bid is higher, shouldn’t the ad be higher up on the page?

Yes and no. For exact terms, we don’t see this happen; the relationship between CPCs and average position is generally positive. We do see this with broad and phrase match keywords, however, since in both cases a keyword is involved not in one auction, but many. Given the nature of the PPC competitive landscape, each potential broad-match query will have its own auction, so a higher bid for ‘widget’ could move ‘widget’ up five positions, but only move ‘red widget’ (to which ‘widget’ is broad-matched with) up one space.

The overall decrease in average position occurs because a higher bid could lead to an increase in the number of auctions (different search queries) the keyword is now eligible for.  For example, let’s say that at 20 cents the broad-match ‘widget’ ad has too low a bid to appear for the search query ‘blue widget’. If we increase the ad’s bid by 10 cents, though, its new bid of 30 cents is high enough for ‘widget’ to cross the first-page threshold for ‘blue widget’. Since the increase in bid is small, the ad will most likely appear low on the page. For this example, let’s presume that Google displays the ad at position 10.

Since ‘average position’ is determined by adding the numerical position of each impression’s ad and then dividing by the total number of impressions, this outlying, position 10 spot will skew the numbers and lower the reported overall average position for ‘widget’. If, after increasing its bid by 10 cents, ‘widget’ on the query ‘widget’ moved from position 3 to 2 for 10 impressions, while on the query ‘blue widget’ it moved from not-appearing to position 10 for 2 impressions, then the average position for the term ‘widget’ would be 3.3 (40, the sum of the positions, divided by 12 impressions). In this situation, we increased the bid by 10 cents, but, to our dismay, the average position subsequently dropped from 3 to 3.3.

So, the ostensibly ‘worse’ average position is misleading. For no individual search query did the average position drop. However, the overall average position dropped because you now have your ad appearing in low positions for new search queries that were previously too pricey. This idea can be corroborated by analyzing your traffic. Did average position drop but impressions go up? If so, then you’re probably dealing with an increase in the number of auctions.

This is a good example of why the average position metric should be viewed with a grain of salt. While it is helpful in providing a general idea where your term is (such as position 1.3 versus 24.4), the number itself isn’t very useful in determining where exactly your term is for any individual auction. Nor does a lower average position necessarily indicate that the term is being pushed down the page. Indeed, such as in our example, a lower average position actually means you have more exposure and more traffic.


5 Responses to "CPCs & Average Position Subtleties"
ManiBar says:
Hi there, I always find your posts very interesting and I believe they are based on the analysis you have on the data you manage. This post is in this line and explains quite well the effect. I am curious to know if you analyze deeply how the effect of increasing the max cpc affect the avg position of exact match keywords. Do you think that increasing the max cpc on those keywords could make the ads to appear on search queries at certain times of the day when most of the advertisers are bidding higher and because of that show the ads in lower positions, making the daily or weekly average position lower in the page? I mean the possible relationship: Increase max CPC -> Appear in queries at hours with more competition ->Decrease avg position on those impressions -> Decrease avg position
Maggie says:
Very interesting phenomenon! It does seem counter-intuitive. How would you recommend marketers reverse it?
Manibar, thanks for your comment. You’re right that increasing bids on exact match terms could potentially occur simultaneously with a decrease in overall average position. The cause would be similar to why it occurs for broad match terms; namely, that each search query is a new auction. A search for the exact match ‘widget’ at 9:00am won’t necessarily yield the same ads as the search at 2:00pm, given the possibility of bid changes and increased (or decreased) competition on the term at any given moment. It is quite possible to have an ad that appears all day except between, say, 2-4pm, when competitors may be bidding higher due to more traffic or better traffic value. An increase in your CPC, then, just like with the broad match terms, could lead to your ad now appearing between 2-4pm, but at a low position, thereby decreasing the reported overall average position. When this does occur, however, I would hypothesize that the average position isn’t affected heavily. While your ad may be appearing low on the page for that two hours, presumably, if you have increased its CPC, your ad will be higher than normal for the other twenty-two hours. These twenty two hours of higher positions would probably offset the two hours of lower positions. This constantly-changing competitive landscape is something PPC marketers should always be aware of, even when dealing with exact match terms. We can hypothesize how a bid increase will impact average position (or sales, etc), but our bids don’t exist in isolation, and we must always be mindful that changes we make could happen simultaneously with those made by current competitors or new advertisers entering the playing field.
Maggie, I think the important fact to remember here is that the decreased average position isn’t necessarily a bad thing. The reported number may be lower, but the ad is actually appearing higher for most, if not all, individual searches. To reverse the effect, you’d have to remove the bid increase or change the match type to exact—two decisions that could limit traffic and potentially hurt the account.


Check out what others are saying...
[...] We did in fact, notice a change in average position. After the change in max CPC the average position fell from 2.5 to 3.6. This change is certainly significant but not one that has had a negative impact on volume. This change in position is most likely a result of the increase in the number of impressions in the account from having a higher CPC and being eligible for more auctions. More information about average position can be found here. [...]

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