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Google Quality Score Update: First-Page-Bid Guidance Will Drive Up CPCs

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Heads up: Google is changing how they compute Quality Score.

We got a powerpoint from our helpful G reps about this on Friday. That deck has essentially the same content as their blog posting on this (see Inside Adwords, 8/21/08, Quality Score improvements).

In a nutshell:

  • QS is no longer keyword static, but rather will vary by user query, geotargeting, etc.
  • “Inactive for search” distinction goes away — every non-paused ad has the theoretical chance to be served, even if in practice low-QS low-bid ads never will
  • “Min bid” metric replaced by “‘First page bid” metric

The first point should really help advertisers, a good thing. The second point doesn’t matter much. That third point is most interesting. To quote Google:

We’re replacing minimum bids with a new, more meaningful metric: first page bids. First page bids are an estimate of the bid it would take for your ad to reach the first page of search results on Google web search. They’re based on the exact match version of the keyword, the ad’s Quality Score, and current advertiser competition on that keyword. Based on your feedback, we learned that knowing your minimum bid wasn’t always helpful in getting the ad placement you wanted, so we hope that first page bids will give you better guidance on how to achieve your advertising goals.

While many advertisers will indeed find first-page-bid (FPB) guidance more helpful than min-bid guidance, FPB also encourages positional bidding.

The outcome?

For all keywords with more advertisers desiring page 1 than there are page 1 slots available, FPB incites escalating bid wars.

The impact?

Good for Google shareholders, tougher for Google advertisers.

Not a huge impact, I predict, as major advertisers competing on high-cost high-volume “head” keywords have an intuitive sense of the bid landscape, and have a sense of the approximate cost of various ranges on the page. But increasing emphasis on B2P will likely drive modest increases on prices for “tail” term clicks, as legions of smaller advertisers turn to FPB for guidance.

Focusing too much on your competitors leads to irrational bidding. As PPC advertisers, we can’t assume our competitors have the same goals or economics as we do. In many keyword verticals, we can’t even assume our competitors are bidding rationally. Blindly following competitors’ bids can lead you off the cliff.

Advertisers face a choice:

  1. Bid-to-position, letting the economics shake out as they will (“Golly, staying on page one is darn costly, and we’re losing money there”), or
  2. Bid-to-economics, and let the positions shake out as they will (“We don’t want to lose money on keyword “X” and so we simply can’t afford page one.”)

I’ll let you in on a competitive secret. At RKG, we almost always follow the bid-to-economics approach. Why? Because doing so generates greater profits for our clients.

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  • Alan Rimm-Kaufman
    Alan Rimm-Kaufman founded the Rimm-Kaufman Group...
  • Comments
    19 Responses to “Google Quality Score Update: First-Page-Bid Guidance Will Drive Up CPCs”
    1. Olivier says:

      Hi Alan,

      When you say that you follow the bid-to-economics approach and it leads to more profitable sales, does this come at the expense of volume of sales? One of the biggest challenges we face is finding that sweet spot between position and sales for our clients.

      Olivier

    2. Thanks for sharing this and what your take on it is… I would most likely take the bid-to-economics approach as well. Seems better!

    3. Ophir Cohen says:

      Hi
      I just posted some screen shots from the new scoring system – seems really nice: http://www.ophircohen.com/2008/09/17/google-quality-score-update-now-live/

    4. Alan,

      Can you give more detail on what exactly you mean by

      “QS is no longer keyword static, but rather will vary by user query, geotargeting, etc. ”

      Thanks,

      BLM

    5. Oliver — yes, there’s always a tradeoff between sales and profits. Picking that tradeoff is the most important strategic decision a direct response advertiser makes. See this video on setting your A/S target.

      BLM — Google laid out the changes on their blog (link) in late August. We’ve since reported that so far at least the effective impact of the new QS is modest for large advertisers.

      Cheers –

      Alan

    6. TraiaN says:

      Alan,

      For our clients the new QS has little effect. But that may be due to the fact that we already had our clients’ landing pages optimized. Anyways, it’s good Google provides a little more details on the Quality Score. Even tho QS will remain a big mistery for most of us. Some reverse engineering done anyway :). My conclusion is that a highly optimized page in terms of SEO, will generate a great quality score on Adwords also.

    7. While Google has removed Minimum Bids in favour of First Page Bids, I still find some of my ads missing for certain keywords, i.e. Inactive! But the good news is that my CPCs have not increased with this new bidding system.

    8. Alexander Klivecka says:

      Agreed. I do freelance Paid Search Marketing work, and see “first page bid” estimates of $10 or more on terms with no competition, which is ridiculous and completely absurd. Having been a former Google employee, I can say that I have no doubt that Google is trying to drive CPCs up through unfair bid guidance. I’m not surprised, just disappointed.

    9. stosh says:

      regarding this statement:

      “We’re replacing minimum bids with a new, more meaningful metric: first page bids. First page bids are an estimate of the bid it would take for your ad to reach the first page of search results on Google web search.”

      What does this mean? The phrases “netlab” produces no ads on google (U.S.), but they insist it needs .40 to get to the first page. I’m new at this, so maybe I don’t understand the rules to the Google way of doing business. As a Google expert, does this not seem misleading to you?

      (also: Same results “first-page-bid-estimates” for terms like “netlab neural network”)

      -stosh

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