How the AdWords Ad Rank Formula is Changing

Improvement or not, the new ad rank formula is changing it’s look (image source)

Google recently announced that their good ol’ ad rank formula is changing. Before, the AdWords ad rank formula for search was based on max cost per click (CPC) and quality score. It was a very easy and simply equation.

In the past, if your max keyword CPC ws $3.00 and then multiplied by a quality score of 4, it would equal 12. If your competitor’s max CPC was $2.oo and their quality score was 7, then they would equal 14. This means that they would outrank you because their ad rank formula resulted in a higher outcome (14 vs. 12).

You can therefore see that a higher quality score can often be the reason you pay less for a click and outrank higher paying competitors.

As of Tuesday, October 22, the AdWords ad rank formula has changed forever.

For better or worse, the change was created to improve the relevance for the user searching for your services and/or products. This may make it more complicated for us to improve our marketing in the beginning, but in the long run it’s better for everyone.

As mentioned earlier, the previous formula was based on 2 parts: max CPC and quality score. Now, a third party has been introduced in the ad rank formula calculation—ad extensions and format.

Meaning that if two keywords are identical in max CPC and and quality score, then the one with the more positive expected ad extensions will dominate the one with less.

With this change, this means that we all need to be more aware of campaign vs ad group level extensions. It’s easy for us to set campaign level extensions (especially sitelinks) and leave it at that. With the new ad rank formula change, it makes more sense to build out even more granularity and test ad group level ad extensions as well.

The industries that will benefit mostly from these changes to the ad rank formula will be the more competitive/higher cost per click industries where everything is needed to out do their competition.

What steps have you taken to improve your ad rank? Have you seen any improvements by testing your extensions?