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BizReport : Search Marketing : August 10, 2007

Google alters top ad placement formula

In the coming weeks, Google will be changing the algorithm that determines which ads will feature in the top placement spots, above the organic search results.

by Helen Leggatt

Google currently determines top placement ads by looking at Quality Score and “actual” CPC. Those ads that achieve a pre-determined top placement quality threshold, in terms of quality and CPC, are allocated top placements.

However, the AdWords blog has recently announced that changes will be made to this algorithm. More emphasis will be placed on the quality component and “actual” CPC will be replaced with “maximum” CPC. Advertisers rarely pay their “maximum” CPC, with “actual” costs often being lower.

What does this mean for advertisers? More control over achieving top placements for their ads. Why? Because “actual” CPC can’t, on the whole, be controlled by advertisers (it being affected by bidding behaviour from other advertisers), marketers have no control over this figure. “Maximum” CPC, however, can be set by the advertiser.

Some in the industry think this is all about money-making for Google, and that they will be charging maximum CPC for top placements. I can see how this might happen, with large companies throwing money at their "maximmum" CPC while smallers business are unable to do so.

However, as noted in an in-depth article on Search Engine Land, Google doesn't intend for advertisers to pay their "maximum" CPC, but will continue to charge the “actual” CPC, merely using the “maximum” CPC in the algorithm.

Tags: AdWords, CPC, Google, quality score, top placement

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