This week, Google announced that it would be changing its Ad Rank calculation (the system for ranking paid search ads). Formerly, Ad Rank used (1) max CPC bid and (2) Quality Score to calculate ad position. Ad Rank will now consider a third component—the expected impact of the ad’s extensions and formats. In estimating the impact of ad extensions/formats, Google will consider (1) relevance (2) click-through rates (CTRs) and (3) prominence of the extension/format. Ad Rank will also be increasingly emphasized to determine if an ad is eligible to be displayed with extensions/formats.
WHY the CHANGE?
By including ad extension performance in Ad Rank, Google is incentivizing advertisers to utilize and optimize extensions to improve position. Google notes that extensions are important to searchers because they “provide more information to potential customers and additional ways for them to respond”—like click-to-call, location extensions or sitelinks to deeper pages. Extensions/formats increase ad quality and CTRs. By emphasizing the importance of extensions, both Google and advertisers can drive better CTRs and more paid clicks.
Cost-per-clicks (CPCs) may also be impacted. Google noted that advertisers may see lower CPCs if their extensions are relevant/optimized and likely to achieve high expected impact. On the other hand, CPCs may increase as ad position improves or competition increases from other advertisers focusing on optimizing extensions for high expected impact. But, some extensions can only be activated if the advertiser owns the trademarked keyword; thus, the advertiser will have no competition in relation to extensions/formats on these keywords, and CPCs could fall.
Additionally, now that Ad Rank is more important in determining whether extensions/formats can appear within ads, advertisers may need to increase bid (or Quality Score or expected extension impact) for extensions/formats to show.
1. Optimize Extensions/Formats
Going forward, highly relevant and optimized ad extensions/formats will generally improve Ad Rank. Utilize all extensions/formats that make sense for your business or goals:
Google will also automatically serve your eligible extensions/formats in situations where the extensions are likely to help searchers (e.g. an “auto repair” query from a smartphone will automatically show click-to-call and location extensions, if eligible; but the same query on desktop will show seller ratings and sitelink extensions). This will help advertisers serve the extension (or combination of extensions) that will drive the best CTR.
2. Elevate Tracking/Measurement
This announcement is good time for marketers to re-evaluate approaches to tagging and measurement. Google continues to develop products that work best when leveraging Google integrated tracking solutions like AdWords conversion tracking and Google Analytics—often as secondary analytics platforms that provide value beyond ad management and primary web analytics platforms.
Rather than simply installing AdWords conversion tracking and Google Analytics, marketers should use this as a time to re-evaluate their measurement technology infrastructure to ensure ongoing flexibility to measure and manage audiences and performance. For instance, to optimize extension performance, a measurement stack could include:
- Tag Management: Free or for fee, it’s critical that marketers have the right technology platforms in place to deploy and manage tags at scale
- Google Analytics: Google’s free and premium versions have become a critical component of marketers’ toolboxes as Google has integrated measurement and retargeting across platforms
- AdWords Conversion Tracking: Currently, advertisers must have AdWords conversion tracking in place to measure extension/format performance
- Data Management Platform (DMP): Marketers are increasingly turning to DMPs to manage first- and third-party audience data across advertising and website content. It’s still early in the DMP game; marketers are focusing on implementation and near-term wins while setting the stage for sustainable management of data and audience activation over the long-term.