Every company that advertises in Google AdWords is interested in making its ads attractive to customers and ensuring that they occupy top positions on search results pages. For Google, good ad conversion rates are also beneficial, as they confirm the effectiveness of AdWords as an advertising platform.
Thus, ideal conditions are created for competition among marketers placing ads for similar keywords. The order in which competing ads appear in search results is determined by their Ad Rank — a value that significantly affects the likelihood of an ad catching the attention of a potential customer.
In addition, the cost per click (CPC) for your ad is influenced by the Ad Rank of the next competitor below you — calculated by dividing their Ad Rank by your Quality Score. Previously, the Ad Rank of an AdWords ad was determined by two key factors: the maximum bid per click and the Quality Score.
However, at the end of October 2013, Google AdWords announced through its official blog a change in the formula for calculating Ad Rank and an increase in its impact on ad positioning. In particular, the system now takes into account the relevance of ad content to the extensions and formats used in the ad. For now, this innovation applies only to search ads.
What will this change in the ad rank calculation algorithm mean in practice?
These steps by Google can be seen as a push to encourage advertisers to use ad extensions, since ignoring these features will directly affect both the cost and effectiveness of your advertising campaign.
Adding extensions will undoubtedly have a positive impact on your ad’s CTR (click-through rate) and Quality Score, but it’s important to remember that the calculation of the maximum cost per click (CPC) also depends on the Ad Rank of competing advertisers.
If your competitors start using ad extensions, it could lead to a drop in your ad positions and a simultaneous increase in CPC. Such promotion of extensions may cause the average cost per click to rise (a high competitor Ad Rank equals higher CPC) and make extensions practically mandatory for achieving top positions on the search results page.
As the number of ads featuring one or more extensions increases — and as these ads take up more space on the page — organic search results may become less visible, especially for commercial queries. This, in turn, can reduce the effectiveness of SEO promotion.
With the new approach to Ad Rank calculation, Google gives marketers two options to maintain visibility: either create well-optimized ads using all available features, or increase their bids. Moreover, with the continuous addition of new extensions, small businesses, which often struggle to keep up with all Google Ads updates, may find themselves at a disadvantage compared to larger advertisers.
Author: Aleksey Zamurtsev
