This matters, so pay attention. Google has hung a big juicy carrot at the end of the AdWords stick.
Everything Google does makes sense if you understand 80/20. 80/20 says: Reward your best advertisers by offering even more tempting carrots on the end of the stick.
For years Google’s formula has been:
Position = Quality Score x Bid Price. Where two thirds of Quality Score is Click Thru Rate.
What’s new is, Ad Extensions are the tie breakers. If two ads are close, the winner is going to be the one that makes best use of Ad Extensions.
None of this matters if people can’t see your ad extensions. They only see those in the premium space, the top three positions in AdWords.
This means – if you’re not grooming your ads for the top 3 spots, you’re not in the game.
Ad Extensions push the organic results lower on the page and drive more revenue for Google.
This means you need to be testing your extensions and getting enough exposure to appear in the top 3. Otherwise, Google doesn’t consider you a player.
Good article on this by Wordstream:
http://www.wordstream.com/blog/ws/2013/10/24/adwords-ad-rank-algorithm
My opinion on what Google is doing:
The success rate of Google advertisers used to be 80/20; now it’s 90/10. 10% of the advertisers get 90% of the clicks. Google is less and less interested in the positions running down the right side and more interested in rewarding the top 3 spots.
They are even experimenting with large banner ads at the top of search results.
What this tells me is, Google is ALL about money now. They are not about mission. They are not about sticking to their original objectives or identity.
They are whoring themselves out to the almighty dollar. Which of course is what public companies always do. Now they have every right to do this, but I also believe this is hurting them.
It is hurting them in the long run because a Google search offers you fewer interesting options than it used to. Many times there are no results on the right side, only the top 3. They are just driving you towards the top players.
I don’t think many people appreciate how many businesses and industries now exist solely because a very large search engine exists that sells advertising. The very phenomenon of AdWords and things like it is the highest kind of economic alchemy. It is the very thing that makes recessions go away and creates economic booms.
What made Google great originally was the diversity of offerings. Insiders tell me, for example, that when Google started slapping down advertisers with Quality Score stipulations, their SEARCH volume started going down! In other words people were subconsciously expecting to find less interesting things to buy on Google.
This degradation happens to all large companies, unfortunately. Law of large numbers.
But anyway, regardless of my idealism or the “should be” world, the IS world is that you gotta be one of the top 10% players, or you ain’t playing. This means *winners win bigger* and losers lose faster.
If you’re on top of your game, you get A HUGE AMOUNT OF TRAFFIC. I just talked to a guy the other day who sells a particular kind of medical device. He’s top dog in his market and he’s just minting money.
I’m telling you, being #1 in your market has never been more profitable. Recession or not.
Dominate your market. And sleep with one eye open.
Perry Marshall
Dramatically improve your business in 48 hours. December 16-17 in Chicago http://www.4manintensive.com
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About the Author
Perry Marshall has launched two revolutions in sales and marketing. In Pay-Per-Click advertising, he pioneered best practices and wrote the world's best selling book on Google advertising. And he's driven the 80/20 Principle deeper than any other author, creating a new movement in business.
He is referenced across the Internet and by Harvard Business Review, The New York Times, INC and Forbes Magazine.
4 Comments on “Important: Google’s ad rank formula has changed – Ad Extensions”
I agree Perry! This is just another example of corporate greed running out of control. Most SMB’s are already running on ultra thin margins. While they try to make a living and keep people employed, they are being squeezed from every angle. Businesses cannot survive on Amazon margins. Hell, if it weren’t for the crooks on Wall Street, Amazon wouldn’t exist. They don’t consistently earn a profit! Jeff is a billionaire because of his stock, not his companies profits!
Soon all that will be left is large companies selling cheap junk, paying their employees minimum wage. The Dead Tree that was once a great country is slowly being rattled by the winds of technology and greed, timber…
When you say “This degradation happens to all large companies, unfortunately. Law of large numbers” – if Google had one ounce of courage, they’d not be doing this. Playing to the lowest common denomiator – money in this case – will only damage them.
After all, that’s when their searchers started looking elsewhere. No doubt their profits went up, their shareholders were pleased. But the rot had set in, the corporation mentality established and the slide to mediocrity began.
Anybody – and that includes you, Perry – anybody who measures anything using money as a criterion is on the wrong path.
That is final. I knows my 80-20 better than most, possibly better than you do yourself. My point is that 80-20 is about QUALITY, not quantity. And you cannot measure quality with a ruler.
Perry, another thing worth mentioning is that with the right account structure, each keyword essentially becomes its own economy.
With the right campaign structure, right adgroups, and right ads, not only do you not have to be #1 in your industry, you dont even have to be #1 in your market.
If you truly understand your industry, truly understand your market, and truly understand how to get the most leverage out of Google Adwords…you can crush your competitors one keyword at a time.
Agreed!