What is Adwords Quality Score and What It means for You
What is a Quality Score?
The general concept of a Quality Score was first introduced by Google. It is an aggregated estimate of PPC ad, keyword, and landing page quality based on past performance. Scores range from 1-10 (10 being the highest) and is influenced by these factors:
- Click-through rate (keywords and display URL)
- Ad relevance and performance (ad copy relevance, ad performance on specific sites and sites in the Display Network, and ad performance on targeted devices)
- Keyword relevance (as an ad group in context with keyword search matches)
- Landing page experience (relevant and original content, navigability, load time, etc.)
- AdWords account historical performance (including geographic performance)
Why Do Ad Networks Need a Quality Score?
Google and other major search engines cite user experience as the primary reason for their implementation of a Quality Score rating. The quality of ads, after all, affect how users interact with them and of course, the advertising revenues.
To understand how this strategy works, a better understanding of the different monetization models used by ad networks is needed. There are different ways in which advertisers bid for ads. In the nascent years of online advertising, the most popular is the CPM (cost per mille or thousand) model. Until now, ‘impression’ is still used as the primary unit of ad inventory even though the CPC (cost per click) is now the model of choice by many ad networks.
The shift from CPM to CPC has obvious benefits for advertisers but the implication for ad networks are much more significant. In competitive markets, there is a convergence between an ad inventory’s pre-defined price and the price that advertisers bid. Because of this, ad networks can predict the profits they can gain through the expected sale value of each ad inventory.
In the CPM and CPC models, the same ad auction process occurs, and the two models can even compete in the same ad auction. The difference is that viewable CPM (vCPM) campaigns only target the Display Network. Advertisers pay for every 1,000 ad appearance and viewable instances. With the CPC model, advertisers pay every time an ad is clicked. Google can set minimum bids – different amounts for different advertisers for the same keywords. Advertisers then set the maximum cost-per-click bid or the highest amount they are willing to pay for a single click.
There’s no assurance though that the highest bidder would win the auction. Any bidder can win the auction at a lower price if his keywords and ads are more relevant than the others. All he needs to do to keep his ad’s position is to have a slightly higher bid than the one behind him. But isn’t this counter-intuitive? Nope. It actually makes more sense.
Ad Rank determines if an ad can compete in an auction. Ad ranking signals that are taken into account are CTR (click-through rate), ad relevance, and landing page experience. But the main determinant for ROI and the ad quality is the CTR. It can determine how much Google can earn for a thousand impressions of a PPC (pay-per-click) ad. Let’s have an example.
Advertiser A bids for $3 for each click, advertiser B bids for $2, and lastly, advertiser C bids for only $1. The expected CTR for advertiser A’s ad is 1%, for advertiser B it’s 2%, and for advertiser C it’s 5%. Calculating this we get 10 expected CTR for advertiser A, 20 for advertiser B, and 50 for advertiser C. If we multiply this to the bid, Google would earn $30 from advertiser A; $40 for advertiser B; and for advertiser C it would be $50. This example shows that even if advertiser A and B had higher bids, their low CTR downplays the expected ROI. Google would select the ads that have the highest chance of performing better or risk running low performing ads – that’s where Quality score comes in.
Ad Rank is keyword-based and is triggered in real-time whereas Quality Score is an aggregate of past performances. Google reiterates that Quality Score isn’t used to determine auction-time Ad Rank but it can actually improve ad position. It quantifies the relevance of an ad based on its performance – performance that can’t be quantified unless the ad had been clicked by the user. This makes CTR as one of the most important signals for ad relevance. The more relevant the ad is, the more likely it is to be clicked.
On an economic standpoint, Quality Score aids ad networks in managing the risk of poor performance and optimizing profit from every advertiser. Without a Quality Score, advertisers can win ad auctions based on bids alone. Poor performance could mean a lesser expense since the advertiser would only pay for whatever few clicks his ad generates, yet the ad network still delivers one thousand impressions. A Quality Score is an assurance that no ad slot is wasted. This is since low performing advertisers will have to pay a higher CPC to account for the impressions delivered. If the ad’s low performance continues, the ad campaign would stop running until the Quality Score improves and the ad’s expected CPC converges with the pre-defined price or minimum bid.
What is the Implication of a Quality Score for Advertisers?
We briefly discussed the implications of a low Quality Score and its implications on the ad’s CPC. But it is also evident from an advertiser’s – your perspective that ad relevance isn’t only about user experience, or even about the ad network’s profits, but also about the effective monetization of ad impressions. Aside from that, Quality Score has a direct (or indirect) correlation with the following:
- Lower cost per click.
- Lower cost per conversion. Cost per conversion is usually higher than the cost per click since not every click results into conversion.
- Higher ad ranks.
- Impression share.
The following approaches can help optimize Quality Score:
- High CTRs should not be your main goal. The increase of CTRs to optimize the Quality Score doesn’t necessarily maximize ROI. It is erroneous to believe that more clicks equal more sales. It can happen, but not on the same ad budget. You should pay attention to key performance metrics like cost per sale and/or cost per lead.
- Craft ads according to campaign goals. Aside from paying attention to the key performance metrics, you should know your ‘ideal prospect’, prospective customers that you want to optimize your ads for. This is to increase the response rate of these prospective customers.
- Organize keywords in tight themes for different ads. Also, focus on testing ads for your top keywords until you see an improvement in the Quality Score. You may need to pause low-performing keywords so that your CTR history would be good.
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