Assumption 1: Your ad position on Google is based on how much you’re paying.
Not necessarily true. Your position on Google is based on more than just how much you pay. Your bid only consumes only half of the formula. Sometimes your quality scores are so bad that you’ll never show above your competitor no matter how much you bid.
Assumption 2: Ad position is based on “Bid x Quality Score”
Don’t come banging on my door if your quality score is awesome and your bidding at the top. This is just a factor in positioning. Ad rank threshold also measures into the equation. This threshold can influence how much you pay over time and for position. Where can you find it? You can’t. No one knows. Google knows what your competitor is will to pay. So, Google knows you’re willing to pay a little more for your leads, or a “minimum price.” Cheap clicks are starting to disappear. Every threshold is different for each auction. If you know someone paying for a particular keyword, that doesn’t mean you’re going to pay the same. For example, if a lawyer is willing to pay $1000/click, the threshold isn’t going to be $1000, but will also not be $20. It may start around $50. This means the $2 bid may not be shown in a relevant position. Google knows you’re willing to pay more.
Assumption 3: My bids should be low because there are very few or now other ads.
Well, ad threshold takes care of this. You ad could be relatively expensive even if there are no ads that show below it. Or even if you’re the only advertiser. You could even show at the bottom of the search page. This means there’s a minimum buy in or a “reserve price.” What is it? No one knows. You won’t know until you’re doing it. Every threshold is a factor for YOUR ad rank. Everyone’s ad rank is different. Each auction is different. For every search, there’s a different threshold. The penny saver system is done.
Assumption 4: Only Low quality ads have higher thresholds thus requiring higher bids.
This can also be true for high quality ads. Competitiveness of ads. So, if there are two advertisers both will have a similar opportunity to with the auction. As the gap in ad rank between two advertisers grow the higher ranking ad will be likely to win. This is the organic aspect of the threshold. It helps lifts the ads with the best relevance, best quality, and experience . with similar ad rank. Google doesn’t want the big guys to always win. Google wants the best experience for the user. Google is saying these ads are more impactful and more useful.
However, the winner of the ad may also pay a higher cost per click for the benefit of the increase certainty of winning. So, you get to be number one because of better ad ranking and you also have to pay more for the benefit of being number 1. Hmmm…sounds like taxes. The benefit is the bigger companies with a ton of money can’t cheat the system. This certainly levels the playing field. It also forces the need to pay attention to organic aspects of user experience and ads.
Assumption 5: My keywords have high quality scores and my ads are high quality. My ads will always rank high.
Ready for the gut punch? The threshold changes on every single auction based on industry, user signals, devices, topics and nature of the search. These are just a few of the things. The threshold is interpreted by every auction. Meaning, every search the user’s performed. History of what the user has searched comes into play. Google will serve ads based on what users have searched for in the past and serve ads based on their search. Your ad rank will change given these different signals. The context of the person’s search. It’s not the keyword you select only and how you relate to it as the advertiser but based on the individual/person performing the search at that time. With the ad auction, context matters. When calculating ad rank, Google looks at the search terms a person has entered, the person’s location at the time of search, the type of device, the time of the search, and nature of the search terms and other ads and search terms that show up on the page. And Google loves to keep things interesting (keep from laughing)…and other user signals and attributes. What are signals and attributes? We may never know.
Bottom line, if you’re advertising and things are going well and you’re making money, don’t stress out. Keep putting out the quality ads, select the relevant keywords, and keep things simple. Pay attention to your competitors. If you’re my client, rest easy. I’ve got this.