What is the ad rank in Google AdWords

Ad extensions and ad rank

Google has made a change to the way they calculate their ad rank. Quite unobtrusively and quietly, it was announced that a further component is now being used for its calculation: "the likely effect of the ad extensions and formats you are using". The following article shows what this is all about, what effects have to be considered and whether these are really "optimized formulas for determining rank", as Google promises.

The previous ad rank

The auction model in Google AdWords differs from that of classic auctions. The latter will only decide on the incoming bids: whoever bids the most wins. This can be different with AdWords.

The winner of AdWords auctions is the one with the highest ad rank. This ad rank takes into account not only the bid, but also the Quality Score. This quality factor is a value assigned by Google at the keyword level, which is intended to express relevance.

The ad rank per keyword is therefore as follows:

Ad Rank = Keyword Quality Score * Keyword Maximum Click Price

The advertiser with the highest ad rank is in ad position one, the remaining advertisers rank in descending order in the following positions.

In Figure 01 (calculation of ad rank and actual click price) you can see an example of the calculation and the resulting order: Several advertisers are fighting for the best ad positions. You have specified your maximum click price (max. CPC), Google has determined the quality factor (QF).

By multiplying the maximum click price and the quality factor, the ad rank is calculated, from which the respective ad position and thus the order of the ads result.

You will not see this invoice in your account. The bid price, ad position and actual CPC are displayed. But the quality factor displayed in your AdWords account is only an approximate value; the ad rank is not shown at all. You also don't know the values ​​of your competition - and these are decisive.

So take a look at Advertiser C. Although he makes the highest bid, he is only listed in third place. Due to its low quality factor, it has to let the two competitors A and B pass by. You will achieve a higher ad rank because you have been assigned a significantly higher Quality Score.

Conversely, this also means: In order to get to position one, C either has to offer significantly more - namely so much that it achieves a higher ad rank than the current leader A. His bid price must therefore be higher than 5 euros. Or he has to increase his quality factor himself.

You can tell that the quality factor does not regulate everything by the advertiser E. He has the second best quality factor of all those listed, but still only achieves the lowest ad rank due to his low bid and is in 5th place.

The actual click price

The unambiguous ranking of the delivered advertisements results in the manner described. But Ad Rank and Quality Score don't just affect ad positions. You also determine how high the actual click price to be paid is.

This results from the principle of Google Discounters: Every advertiser pays so much that they can just keep their ad position. He achieves this by reaching a slightly higher ad rank than the one below.

This principle sounds more complicated than it is: In order for advertiser A to maintain his first ad position, it is completely sufficient that he is just slightly better than B. It doesn't need an ad rank of 20 - just better than 14 would be completely sufficient.

How does A get “just better than 14”? The quality score is set by Google. Thus, the only variable component of the ad rank is the bid, which is not called “maximum CPC” for nothing: you don't want to pay more, paying less is ok.

A bid price of 1.40 euros would be enough for advertiser A to achieve exactly the same ad rank of B positioned behind him: Quality factor of 10 * bid of 1.40 = ad rank of 14. But since A is ranked before B, he has to offer one cent more, i.e. EUR 1.41 - and thus achieve the desired ad rank of “just better than 14”. These EUR 1.41 are then the actual click price that he has to pay.

The same calculation applies to advertiser B. He is in position 2, for which a slightly better ad rank than that of C, the third-placed one, would be sufficient: (ad rank C / QFB) + 1 cent = 1.72 euros. So B pays more than A, but remains behind him because of the ad rank.

You can see that ad rank has two effects: the ad position and the actual click prices to be paid.

Let's assume that the ad rank would increase from B to 18. What would happen? Everyone's ad positions stayed the same, but A would have to pay more. The reason is easy to see: because in order to be able to maintain its leading position, it no longer has to exceed the ad rank of 14, but rather that of 18:

If the ad rank of advertiser D were to increase to 13, the order would even change - D would be in position 3, C only in 4. The actual click prices would change for B, C and D - because they would all have new " Positioned among them ”that they would have to surpass.

You can tell how much movement there is in this model from the fact that the quality factor is recalculated for everyone involved with each search query. In addition, not all advertisers always take part in an auction, that advertisers adjust their bid prices, make other changes - or, and this is new, that Google simply brings a new component for the ad rank into play.

This has now happened. In addition to the quality factor and the maximum CPC, the likely effect of the ad extensions and formats used has recently been included in the calculation of the ad rank. Also, when it comes to determining whether an ad will show in conjunction with certain extensions and formats, Ad Rank is now a bigger factor. (Source: http://adwords-de.blogspot.co.at/2013/10/optimierte-formeln-zur-rangermittlung.html).

Ad extensions as a new component

Ad extensions add business information or other services to the actual ad. They offer companies the opportunity to present themselves to the searcher in addition to the regular advertisements: for example, through additional information in the form of sitelinks, through additional functions such as click-to-call or through information on the company's location. You can find the current selection when you go to the "Ad extensions" tab in your AdWords account:

Ad extensions usually result in higher click-through rates and more visitors. This is of course not only beneficial for the advertiser, but also for Google: Higher click-through rates mean more clicks, more clicks on paid ads mean more revenue for Google. So the group has a keen interest in actually using the extensions.

The numerous changes and additions made over the past few weeks and months show how important Google is to this topic. New ad extensions were added, formats were changed, and some extensions such as sitelinks or call extensions can no longer only be stored at campaign level, but also at ad group level.

In fact, innovations are now coming so quickly that numerous advertisers can no longer keep up and are already complaining about them. Small and medium-sized companies in particular that have previously operated AdWords without special specialists are no longer able to cope with the constantly growing demands.

Google, on the other hand, doesn't seem to be moving fast enough, especially with ad extensions. And with the change in the ad rank, the advertisers are now put under corresponding pressure.

Consequences of the change

As shown above, the ad rank determines the ad position and the actual click price. If ad extensions are now also taken into account in the ad rank, they also have an impact on the delivery of the ads and the costs.

What does this mean in practice? If you had not previously saved an extension, your ad was displayed without this extension. Now such neglect will be penalized if your competitors are up to date. You should therefore urgently use ad extensions and stay up to date with changes and possible innovations. Ad extensions are now a must.

It remains to be seen whether and how Google evaluates the usefulness of extensions that are not stored. Location extensions still make no sense if you are an online shipper who does not want to greet customers at the location. Call extensions are pretty pointless if you and no one answer the phone. It is therefore sensible to limit yourself to booking ad extensions whose information you actually want or can communicate. You should do this, however.

Presumably, sitelinks will be those ad extensions that are now being comprehensively replenished. Because more than all other extensions, they can be used, extended and optimized on the basis of the performance data by practically every company.

At the same time, numerous ad formats are available here - from the number to the arrangement to the output of extended sitelinks. The latter have several advantages for Google: They are very large and often clicked. Since the output of the ad formats is now increasingly geared towards ad rank, advertisers are certainly also turning the bid price screw. In addition, the first organic, unpaid search results are pushed further and further down.

In order to be able to use all possibilities, Google made the corresponding changes in good time - in the input, in the assignment at campaign or ad group level as well as by reducing the maximum number of characters from 35 to 25 characters.

Google itself decides which extensions and formats are played out - both context-related and performance-related: "As a rule, the most powerful and most helpful combination of extension and format that is available is provided for each auction."

Translated, this means that the expected click rate is decisive. With this, both the performance and the context aspect can be mapped - and of course the most income for Google: If ad extensions lead to higher click rates and these lead to more clicks, Google then selects those that promise the highest income.

Google describes the selection with a friendlier example: "Let us take as an example a user who searches for "garage" on his mobile phone in a city center. In this case, the most likely way for the user to be interested in your ad is to make a phone call or tap a link for directions with just one click. Therefore, a combination of call and location extension will serve with your mobile search ad.

Let us now assume that a user is looking for "auto repair shop" on a laptop in a suburb and your ad reaches the third position above the organic search results in the relevant auction. In this case, your seller rating and sitelinks will be served as this is the most powerful and helpful combination of extensions that can be served with your ad in this auction and at this ad position. "

Conclusion on ad extensions and ad rank

The ad rank determines the ad position and the actual click price. Up until now, it was made up of a quality factor and a bid. Now, Google is adding ad extensions and formats as a third component. This is how Google is pushing their use: If you don't participate, you have to pay for it.

Now it may not be new that Google sets the rules for AdWords. But after the forced changeover to the extended campaigns, it is the next unpleasant step in a very short time - this time without changeover time and without prior notice.

Those who suffer are certainly those advertisers who cannot deal with AdWords all the time. However, the changes also have negative effects on the SEO area. Higher click rates and larger ads reduce the importance of organic search results even further.

The change currently affects Google Search. An early update in the display network is therefore expressly not excluded.

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