Google’s Top Ad Placement Formula To Change

Google will be changing its top ad placement formula “in the next few weeks”, according to a recent post on the Google AdWords blog. The formula will consider top placement for those ads, “that surpass our stringent quality requirements.” Top ad placement will also be based on your maximum cost-per-click (CPC) bid versus the actual cost-per-click that you are paying. Google states that the top ad position will no longer depend on the bids of the competitors below you, but rather the quality of your ad and the minimum required for holding the number one position. This development seems suspect to me. What Google seems to be telling us is that we need to spend more money if we want to hold our first place positions on the Google Network. I set out to see how others in the community felt about the news. After taking a look at what others have wrote, they seem to share my sentiments.

In a forum on WebMasterWorld.com, someone had posed the question, ”…Is [this] another attempt to increase actual CPCs/increase revenue, or improve ad quality of their results?” There were 44 respondents and all of them felt that, yes, it is another attempt to increase the CPCs and revenue for Google.

With the new change, it is going to be a whole lot easier to get into the number one position on Google as long as you are willing to put out the extra cash. With Google focusing on your max CPC bid, versus taking into account the bids of your competitors below you, all you will need to do is increase your max CPC bids to hold your first place position.

Google states, “your actual CPC will continue to be determined by the auction, but subject to a minimum price for top spots” which I take to mean that if you want to rank first, there will be a required minimum for which you can set your max CPC bid. Overall, this seems as though it will edge up advertisers max CPCs and therefore bump the actual CPC costs.

Now of course Google spins this formula change as a benefit to advertisers, and for some that might be the case. Though it remains to be seen what will happen to those who are currently ranking in first positions. They also tout that this gives more control to the advertiser who can now jockey for position regardless of the behavior of their competitors. While these DO seem like positive developments at first blush, perhaps this is just a pretty way of Google saying, we’re trying to raise the cost threshold.

So what should you do in the coming weeks to make sure you maintain the performance of your PPC campaigns? For starters, don’t indiscriminately increase your max CPC bids. From our experience, this new change will not affect many PPCer’s because of the simple fact that the number one position isn’t always the best thing for your client. While being in the first position does generate a lot of clicks, the conversions often tend to be very low due to the fact that most of those clicks are impulse ones. Instead of being reactive, let your ads settle into the new formula and be extra vigilant about your cost -per-conversion based on position. For example, many of our clients are getting better conversions in positions 2-4 and if the formula doesn’t affect them there’s nothing gained and nothing lost.

However if you are using this positioning strategy, pay close attention to your cost-per-click to make sure that the bidding war for the number one positions, doesn’t trickle down to your comfy location at 2 - 4. You may find you need to adjust bids and perhaps even copy to make sure you keep your quality score balanced with your max CPC to ride out the changes happening at the top.

In general, keep an eye on it and test out variations in position until you find your sweet spot again.

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