Google changes Ad Rank formula

Google is undoubtedly looking to evolve its paid search results and with its latest changes to its ad rank formula, it continues its crusade.

Previously ad rank, which is Google’s system for ordering ads, was simply determined by keyword Quality Score (QS) and maximum cost-per-click (CPC) an advertiser is willing to pay.  If you’re still unsure how this affected ad positioning, hold on to your hats! Google chief economist, Hal Varian is here to help explain the old formula.

Google this week announced that it will be changing this trusty formula, to also take into account the expected impact from ad extensions and other ad formats.  While we eagerly await Hals next video instalment, it’s worth taking a moment to ponder the impact of the change in formula.  And although it’s no Hummingbird algorithm change that was recently witnessed within the SEO landscape, we think it’s worth paying attention to.

Firstly, what are ad extensions?

Ad extensions expand out of the standard search text ad formats to provide users with more information. Examples of ad extensions include ad sitelinks, call extensions, app extension and social annotations to name just a few.

Ad sitelinks

Image courtesy of Google
Image courtesy of Google





Social annotations

Image courtesy of Google
Image courtesy of Google





Call extensions

Image courtesy of Google
Image courtesy of Google






App extensions

Image courtesy of Google
Image courtesy of Google






Regardless of the impact of this change, ad extensions already are well worth advertisers exploring. Ad extensions can be helpful to the user by providing additional information outside of just the ad, but can also be used by the advertiser to help differentiate their ad in a crowded and competitive space. Furthermore, ad extensions can be used to increase ad prominence by securing additional search real estate, helping drive a greater click-through-rate (which also indirectly impact ad rank through QS) leading to more potential customers.

How will the change impact current SEM activity?

How much weighting Google will give the expected impact from ad extensions within the ad rank formula is unknown, but it’s not predicted to be dramatic enough to cause massive changes. However, in a highly competitive auction environment any edge helps.  Plus, given benefits outlined above, savvy advertisers should not be ignoring ad extension possibilities.

Google have also warned CPC’s may fluctuate to some degree.

You may see lower CPCs if your extensions and formats are highly relevant … In other cases, you may see higher CPCs because of an improvement in ad position or increased competition from other ads with a high expected impact from formats. Source: Google Adwords Blog

Although, we are not predicting major fluctuations in rank or CPC, any change to how Google organises results is significant and worth keeping an eye on.  Additionally, when we consider this change in context of recent Google betas around ad extensions, (e.g. review extensions, image extensions and video extensions), the change seems even more significant.  Google is not only signalling that it wants to evolve traditional paid search ads, its indicating that it plans on rewarding businesses who get on board with the changes.

The message is clear. As Google looks to evolve, so must your paid search efforts. But please do so with care and thought as this doesn’t mean you should recklessly try every extension available. Like any paid search activity, make sure your efforts are targeted, meaningful and relevant. Think about how these formats can help your potential customers and you’re off to a good start.

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