Google is rolling out a tweak to their AdWords system over the next few weeks that will change the way advertisers can obtain the top spots on a search results page – top ad placement formula change.
Hopefully this “new formula” will go the way of Coke’s new formula attempt in 1985…
Here is a snippet from the AdWords Blog about the rationale for this change:
“In addition to increasing control for advertisers, the improved formula increases the quality of our top ads for users. This is due to more high quality ads becoming eligible for top placement, thereby allowing our system to choose from a larger pool of high quality ads to show our users.”
But, this change appears to me to be unrelated to a better user experience. It’s about the bottom line. The AdRank algorithm already does a pretty good job of producing quality results for users (i.e. the most relevant ads are the ones that rise to the top over time). I do not believe that this new tweak does anything to build on the quality of results.
It will raise the bidding environment for sure.
That is why I added “Buy GOOG now!” in the title of this post. Investors will benefit from this change and it will be a better user experience for them as advertising revenue climbs.
That said, I’ve always said that bidding for top placement is usually just an exercise in ego bidding (CEOs and company owners wanting to be at the top ahead of their competitors) . There are times when bidding for top spots is warranted (typically in a brand-building campaign), but what really counts with most PPC campaigns is bidding for ROI.
We don’t let our clients bid for the top spot without hard data that shows this provides the optimal mix of conversions and cost per conversion. That would be doing a disservice to our clients, and they would not be getting what they pay us for.
So, for our clients, the change in the AdRank formula may or may not impact their campaigns negatively. This is something we’ll be monitoring closely. My hope is that our dilligence in managing bids for maximum ROI will mean that we will not be affected too much.
But, there are always those idiots (uh, I mean “irrational bidders”) who come into a market and mess everything up for us smarty-pantses
Here are some other people discussing this issue –
Your thoughts on how the new formula will change the market?