Understanding Quality Scores and Solving PPC Puzzle

If you run Pay Per Click (PPC) advertising campaigns, you know how frustrating it is when you're slapped with a "poor quality score" label and outrageous minimum bid. Quality Score is a dynamic variable calculated for each of your keywords, your ad group and your landing page. This is an innovative method that Google has developed to make sure they maximize their adwords search revenue as well as customer experience when users click PPC ads on Google search network as well as Google Search Partners.

 

Some people will wonder how does a "high quality score" improve customer experience? Here is some explanation for you.

When users click on a sponsored listing on Google Search Engine Results Page(SERPS), they expect to see content, goods and services related to the search phrase they just entered. If they end up on a web site that has no relevant content related to their search phrase, they tend to get frustrated and usually do two things:

1. Click on the browser back button or close to browser to get off the site.
2. Make a mental note to not click sponsored listings in the future

As you can tell, #2 is a disaster for Google's business model. Their billion dollar profit is driven from sponsored listing or paid search listings so it is in their best interests to do something about it and that something is "Quality Score".

In the past, adwords ad ranking and position process was driven by the bid amount. Whoever was bidding higher got the top spot on the sponsored listings. But there was no guarantee that content on the landing page(page that is shown when visitor clicks on the ad) was relevant and matched what ad originally promised. Adding a quality score to the equation actually made it difficult for people who advertise on adwords to promote affiliate web sites, mirror web sites or get rich quick schemes. These people can still advertise on Google but $10 per click minimum bid is going to break their business model. These quality score guidelines have actually improved Google revenue from Google Search and Google Search Network. It works for Google, works for their non paying customer(for example, visitors to Google.com) and also works well for genuine advertisers. Here is an example how it works for Google.

Let's say someone is searching for "Buy Plasma HDTV". Obviously this is a competitive keyword but for the sake of simplicity, let's assume we have three advertisers competing for this keyword:

Advertiser A, advertiser B and Best Buy.

Advertiser A is a web site that has bunch of HDTV stuff but no real products and offers no way to buy a product directly from them. Advertiser B is an online retailer that sell 100,000 others products in addition to HDTV and Best Buy, as you all know, sells consumer electronics. Let's assume advertiser A bids $5, B bids $4 and Best Buy bids $3 for this keyword/phrase..

If you let simple mathematics rules decide the ranking, Advertiser A will be on top, B in the middle and Best Buy at the Bottom. People are likely to click on A but will not find what they are looking for and more than likely they will not click on it again. Same story with B. However, Best Buy is well known and people are more likely to click on it since they are more familiar with its products and services. For sake of simplicity, Let's say Click Thru Rate(CTR) is 3.5% for Best Buy, 1.5% for advertiser A and 2% for advertiser B. Click Thru rate is simply the number or click or leads divided by total number of times an ad is shown.

Let's say each of these advertiserw have 100,000 impressions per day on Google.com. Based on these numbers, here is the revenue that Google can generate from each of them.

 

Advertiser A

Total Clicks = CTR X No of Impressions = (1.5/100) X 100,000 = 1500
CPC(Cost Per Click) = $5
Total Revenue = CPC X Total Clicks = $5 X 1500 = $7,500

 

Advertiser B

Total Clicks = CTR X No of Impressions = (2/100) X 100,000 = 2,000
CPC(Cost Per Click) = $4
Total Revenue = CPC X Total Clicks = $4 X 2000 = $8,000

 

Best Buy

Total Clicks = CTR X No of Impressions = (3.5/100) X 100,000 =3,500
CPC(Cost Per Click) = $3
Total Revenue = CPC X Total Clicks = $3 X 3500 = $10,500

 

Obviously real world calculations are not as straight forward and there are other factors such as click fraud and bid optimization but you get the idea. Putting Best Buy at the top will make Google $2,500 more than any of the other two advertisers. This is one of the reasons why Quality Score is so important.

While this example tend to project a perception that adwords favors bigger and well known players, while it does to a certain degree, it is not always the case. What Google does is to calculate a Quality score for each keyword and then CTR rates for each advertiser competing for this keyword. You may still be very successful and have a terrific CTR rate if your ads are well written, have matching content on the landing pages and provide a positive customer experience for visitors who actually click your ads.

Remember, a poorly written adwords campaign is a recipe for financial disaster. It will cost you lot of money, poor conversion and even worse may force you out of adwords altogether if poor quality score persists on your account. That's why it is important to hire a professional and have them do it for you. Even if your budget is low, hiring a professional could still save you money as compare to going solo.

We, at The Bijnor Group, professionally manage adwords and Yahoo Search Marketing campaigns for our clients and can easily help you start your own as well. If you're looking to take full advantage of adwords program and internet advertising, give us a call and we will show you how to run a cost effective yet high ROI campaign on Google or Yahoo.