Everyone sees the paid/sponsored links at the top of the search engine results when they perform a search. What many are unfamiliar with is the tactics companies implement in order to position their ads in that valued real estate. There are two influencing factors on determining a company’s rank in the paid search space: bid amount and Quality Score.
In this post, we’ll examine both of these elements and explain how the two work together to determine placement in the paid search fields.First and foremost, paid search works as a sort of an online advertising auction. Companies place bids for the real estate and the search engine places priority on the highest bids. Assuming all else is equal, those bidding the top dollar amounts will appear first, paying that amount every time a searcher clicks on the sponsored link. Advertisers only pay if searchers click through the link, otherwise the placement of ads is free. As you may know, in order to provide the most valuable information to searchers, the engines place a high importance on the relevance of each returned search result. Initially, the engines began running into problems with advertisers bidding the highest, and therefore ranking the highest, for keywords their Web sites were not relevant to.
By allowing bidding alone to determine the placement of each paid ad, advertisers had the ability, and took advantage of the opportunity, to purchase top spots without having the relevant content the searcher was looking for. To better clarify this point, let’s look at a quick example. Two online competing brands exist, StartupTech.com and EstablishedTech.com. StartupTech has a paid search budget of $100 per month and EstablishedTech has a budget of $10,000 per month. If a user does a branded search for “Startuptech,” they are clearly defining what they are looking for. However, EstablishedTech with the 10,000% higher budget could outbid StartupTech on their own brand name and therefore receive a higher ranking. As you can see, companies with larger advertising budgets had the opportunity to manipulate the search engines and dominate all competitive keywords, regardless of whether their site was relevant to what the searcher was looking for.
To combat this, the engines developed Quality Score to measure how relevant a site’s content and ad text is to its keywords and the searchers’ query. The higher the Quality Score, the greater priority the engines give advertisers in regards to ranking. Assuming all bids are equal, the ads with the highest Quality Score will be given the top paid search positions. Now, what happens when a high bidder has a low Quality Score? The answer, not surprisingly, is favor goes towards the advertiser with the highest Quality Score. This enables the engines to help ensure they are delivering the most relevant content to their customers (the searchers).
As the following example illustrates, Google employs a specific formula, Bid Amount x Quality Score = Ad Rank, to determine the ranking priority of ads based on Quality Score and the bid amount. Imagine that two companies only are bidding on the same keyword phrase. As you can see, Company 1 with the high bid but low Quality Score has a lower Ad Rank then Company 2 with a low bid but high Quality Score.
The engines would therefore give positioning priority to Company 2.
Note: The higher the ad rank, the higher an advertisers' position, or ranking, in the search engine
To help illuminate just how much of an impact Quality Score can have on a paid search campaign, we’ll provide a quick case study. A client of Rise Interactive is in the insurance industry wanted to own the keyword “life insurance.” Because they had a low Quality Score, they were initially paying $20 per visitor in order to stay at the top of the rankings. To improve upon this, Rise created a landing page and text ad designed specifically for this keyword. The results? We were able to drive the cost-per-click down from $20 to $1.80 per visitor. “Life insurance” also became the number one performing keyword for this particular campaign. By improving our client’s Quality Score, we were able to secure the same high position for a significantly lower cost-per-click, thereby drastically decreasing the client’s cost-per-acquisition and increasing ROI. As you can see, the impact Quality Score has on an advertiser’s paid search placement can have profound effects on a company’s campaign, most importantly on its ROI.