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Google AdWords Top Ad Placement Formula Changes
SE_Magnets




msg:3417943
 2:43 pm on Aug 9, 2007 (gmt 0)

Has anyone seen this new massage? "In a few weeks, we'll improve how ads get promoted to top positions above Google search results, giving you greater control over the placement of your highest quality ads."

I am trying to determine whether their new Ad Placement Formula is another attempt to increase actual cpc's/increase revenue, or improve ad quality of their results?

Any thoughts?

 

zygots1




msg:3419471
 3:52 am on Aug 11, 2007 (gmt 0)

This definitely isn't going to be the benign shuffle Google is packaging it as. I think this is a curve ball that is likely to change the entire Adwords game (at least for us) and everything I'm reading on this development so far seems to be pretty accepting of Google's contention that it will simply provide better quality and shouldn't really impact the bulk of their advertisers. I'm thinking the fallout will be far greater.

Some of our primary concerns:

- If we hold all of our current Max CPC bids steady in an attempt to remain in our current positioning we could see our average daily ad spend jump anywhere from 50-100% immediately. Due to general high Quality Scores we have been achieving high positioning very cheaply--how likely is this to change? I know Google is saying that we won't necessarily be charged these Max CPC's, but in some cases they are 50% or 60% higher than what we've actually been paying.

- If we drop all of our bids to match the Avg CPC's we've been paying we may well drop out of 1-10 positioning altogether, depending on how bidding for top placements changes. This will undoubtedly bring down our CTR--which I would think will damage our Quality Scores, bringing our minimum costs up even further. This is of course not even the real problem with falling out of position as losing good positioning will cost us the traffic and conversions that we've come to expect from our Adwords campaigns.

- Google opening up top placements to more actualized bidding is going to mean our competitors wading in with much larger pockets and pushing up CPC's and bids across the board. A T1 or T2 placement that may have only run $2 or $3 in the past could very easily double or triple as people attempt to bid back into the top spots, pulling costs up all the way down the line.

These aren't small issues for us and the fact that Google's giving us a head's up so that we can 'prepare' makes me even more worried about how profound the impact will be.

I can't believe there aren't more posts on this topic. Algorithms and quality score and everything else aside--this is going to be EXPENSIVE. That's all I care about.

BillyS




msg:3419592
 11:58 am on Aug 11, 2007 (gmt 0)

The way I read it advertisers better be careful about aggressive max bids. You know, the type of bid you don't ever expect your competition to meet.

That max bid might be high enough to land you in a top spot and if it does you'll wind up paying a lot more money for each click.

justageek




msg:3419619
 1:30 pm on Aug 11, 2007 (gmt 0)

I can't believe there aren't more posts on this topic.

Shock maybe?

I haven't gotten any real answers yet from Google but I read it as it's more like an auction with a reserve amount determined by max bids.

I'm guessing that Google was leaving a lot of money on the table when somone had a max bid of say $10.00 but was paying $1.00 because everyone else was low. Now the system can put a reserve amount of <= $10.00 since that would be the max someone would be willing to pay.

If Google wants to make a 'little' more money the max could go to maybe $1.01 but if the system is set for Google to make a 'lot' more money then the system could be tuned to charge $10.00. Anything in between is at the whim of the man behind the curtain turning the 'profit knob'.

Turn the profit knob to the right and the reserve amount goes up, turn it to the left and the reserve amount goes back down. Brilliant.

If Google wants to make even more money then they just need to add a lower reserve to spots 2 and 3 and so on. The only way it wouldn't work is if everyone used good bid management and stopped doing set and forget campaign management. But what are the chances of that happening?

JAG

Shadoze




msg:3419662
 3:10 pm on Aug 11, 2007 (gmt 0)

I can't believe there aren't more posts on this topic. Algorithms and quality score and everything else aside--this is going to be EXPENSIVE. That's all I care about.

Exactly, unfortunately it's pretty much a wait and see, but whenever I hear the phrase 'Quality Improvements" coming from Google, it is basically code for "More Money for them" and "More cost to us"

On of the most amazing things about the entire biz model with advertising through them is the totally inadequate amount of (lack of) information they actually present to their advertisers.

I know of no other method of advertising where those who are actually paying the bills are given nothing but one cryptic statement after another.

Without knowing the specifics, as no one really does, I'm almost 100% certain this will cost the smaller guy a lot more, and allow the bigger players to move in.

Quality? It's NEVER about quality. It's ALWAYS about money.

I hope I'm wrong ( but I doubt it) and if I am I'll post it right here and say so, as I am one of the ones that will likely be affected by this.

[edited by: Shadoze at 3:14 pm (utc) on Aug. 11, 2007]

BillyS




msg:3419805
 7:57 pm on Aug 11, 2007 (gmt 0)

If Google wants to make a 'little' more money the max could go to maybe $1.01 but if the system is set for Google to make a 'lot' more money then the system could be tuned to charge $10.00. Anything in between is at the whim of the man behind the curtain turning the 'profit knob'.

It doesn't work that way. Google has every incentive to reach exactly the right point where advertiser and publisher is winning. If you've got the right max bid in then you have nothing to worry about. If you're gaming the system, then the game just got a bit harder to beat.

Shadoze




msg:3419947
 2:09 am on Aug 12, 2007 (gmt 0)

Google has every incentive to reach exactly the right point where advertiser and publisher is winning. If you've got the right max bid in then you have nothing to worry about. If you're gaming the system,

Exactly what is that point? If you can't define it, how do you know they are actually trying to reach it? And which advertisers are winning and who is choosing those winners?

Gaming the system? I think most people are just playing by the rules Google establishes as best as we are able to figure them out.. Google just likes to change the rules, and then not really tell you what they are in any way that could remotely be called specific, name me another advertising medium that could operate this way?

BillyS




msg:3420152
 2:46 pm on Aug 12, 2007 (gmt 0)

Exactly what is that point? If you can't define it, how do you know they are actually trying to reach it?

Advertiser define it. It's called a max bid. If you're putting in the right max bid then you have nothing to worry about.

I'm almost 100% certain this will cost the smaller guy a lot more, and allow the bigger players to move in.

You're saying it's going to cost you more. Well either you can afford to pay that max bid or you can't. If you're low-balling your max bid then Google's losing. If you're max bid is correct, then that's the place where you and Google (together) will maximize profits.

Shadoze




msg:3420181
 3:46 pm on Aug 12, 2007 (gmt 0)

You're saying it's going to cost you more. Well either you can afford to pay that max bid or you can't. If you're low-balling your max bid then Google's losing.

Do you honestly believe that this move has anything to do with the advertisers profits?

If you're max bid is correct, then that's the place where you and Google (together) will maximize profits.

And how do you or Google know that advertisers are not currently maximizing profits? Google knows this will increase revenue, and they also know where that money will come from..
It will only have an impact on which advertisers profit.

[edited by: Shadoze at 4:33 pm (utc) on Aug. 12, 2007]

justageek




msg:3420247
 6:08 pm on Aug 12, 2007 (gmt 0)

If you've got the right max bid in then you have nothing to worry about. If you're gaming the system, then the game just got a bit harder to beat.

Hmmm. Bid management is NOT gaming the system.

Setting max bid was an easy way to not have to have a bid management strategy where you had to always monitor bids and it also set the system apart from pure bid to placement systems. Seems we're heading back to that type of system and I don't really have a problem with it. Just reminds me of the early Overture days.

The problem I see is for all the people who have had a max bid set and have never hit it. Now they're going to smacked with a higher spend and unfortunately a lot of folks won't be ready for it.

JAG

metakomm




msg:3420328
 8:18 pm on Aug 12, 2007 (gmt 0)

Great.

So I wonder how this is going to effect low competition keywords or merchants who have affiliate programs that protect their trademark?

So I guess getting top placement for $.03 with no competition may be a thing of the past?

I have a client who is the county government and pretty much no one bids on the variations of their county name and we get top placement for most keyword phrases under $0.05.

bw3ttt




msg:3420397
 11:02 pm on Aug 12, 2007 (gmt 0)

Google screws the little guy once again! What a surprise!

It is very much in their best interest to stop sending traffic to the right side of the page.. You can click on the first two links for $1 or you can click on the "we're not worthy" side of the page for 20 cents.. Clicking on the cheap seats costs Google money. I'm sure they'll find new reasons why we right-siders are no longer worthy of receiving traffic in the near future and justify it by using terms like "quality".

Even webmasters making millions of dollars per year are peasants in their eyes.. We're just webmasters trying to make a living by making PROFITS from our traffic and we are a bother. We have no stock price to raise through the Xmas shopping season and therefore we cannot intentionally take losses by paying ridiculous prices for traffic.

Has everyone been to eBay lately? if not, you will soon..

Will someone in the world please please please do something about this growing monopoly? let's just call the internet the Googlenet and get it over with.

robertskelton




msg:3420411
 11:43 pm on Aug 12, 2007 (gmt 0)

A few observations:

1) I have keywords with high CTR, and quality landing pages, and from my point of view, max cpc is still being used to determine who is #1

2) In some cases I bid above $10 to be in #1 but pay only 0.01 a click. Obviously I am getting great value, and Google is sensibly trying to make more money from my ad in #1

3) I expect the minimum bid to be in #1 along the top will range from 0.10 to $2. Any higher and advertisers will leave en masse

4) I expect initial confusion regarding what the min bid will be, and how to find it out (but after time they will show it in the AdWords interface)

The trend is towards over-complicating a system that has worked well until now. The trend is towards to old Overture system.

It seems to be a direct over-reaction to Google's flat profit growth - this & charging for extra storage space in Gmail etc seem to be two ways of increasing revenue that they have put off using (because they won't help PR much) until they are desperate please shareholders.

Shadoze




msg:3420687
 11:50 am on Aug 13, 2007 (gmt 0)

4) I expect initial confusion regarding what the min bid will be, and how to find it out (but after time they will show it in the AdWords interface)

Initial confusion is probably an understatement :)

It would be nice if they could just once actually tell you when something is going to go into effect, instead of their intentionally vague (within a couple of weeks) .

The veil of secrecy that surrounds everything they do is totally unwarranted. If they REALLY wanted to do something for their advertisers, they could at least let them know when the change will actually take place, they won't of course. It's not like they are giving away trade secrets.

Does anyone think they don't know when the change will take place?

The only logical explanation I can see is that a lot of advertisers will get hammered for a few days without knowing what is going on and that equals a few nice paydays for Google.

Have advertisers even received an email explaining the change? I haven't.

netmeg




msg:3420854
 3:30 pm on Aug 13, 2007 (gmt 0)

I can't believe there aren't more posts on this topic.

I'm not going to get all hot and bothered about it yet until I see how it actually plays out for my various clients. There was an awful lot of sturm und drang about Quality Score, and it ended up not really affecting any of my accounts one bit (except positively) I have enough stress over what is to spend too much time worrying about what might be, when I don't even know if what might be will be a problem.

chinara




msg:3421760
 1:36 pm on Aug 14, 2007 (gmt 0)

Any indications that itís live?

ddogg




msg:3421970
 4:40 pm on Aug 14, 2007 (gmt 0)

Every change Google has ever made to AdWords has increased their revenue, so this one will be no different. Look forward to paying more for your clicks. The end.

toddb




msg:3422012
 5:12 pm on Aug 14, 2007 (gmt 0)

This is clearly a move to drive up pricing. I am not sure as to why they are pretending it is a good thing for advertisers. Will we have more control and if so how? What deep pocket person will now fight for the number one spot with an irrelevent ad when they could have done this before? The minmum cost is just a price increase for the highest clicked spot. They have suceesfully driven so many of the lower ads off and destroyed the long tail. Where else can they look for revenue growth?

limoshawn




msg:3422075
 6:28 pm on Aug 14, 2007 (gmt 0)

Every change Google has ever made to AdWords has increased their revenue, so this one will be no different.

Every change I have ever made to any of my businesses was with intentions of increasing revenue. I've certainly never tried to make less.
I'm not sure I follow this argument, are we really to expect Google not to try and make more money?

Shadoze




msg:3422118
 7:23 pm on Aug 14, 2007 (gmt 0)

Every change I have ever made to any of my businesses was with intentions of increasing revenue. I've certainly never tried to make less. I'm not sure I follow this argument, are we really to expect Google not to try and make more money?

Not at all.. they are a business and are in this to make money.. It's how they present it. And the lack of real information they provide. Does anyone even know EXACTLY when it will go into effect? I'll bet they do. Advertisers don't. That is shameful, but typical.

If Google was in the cereal business and decided to raise the price of corn flakes, every press release they put out would tell you how this was a benefit to corn flake consumers everywhere.

I think that's where people have the problem, is them passing this off as a benefit to the advertiser..

"Quality Improvement" is just a code word for "get out your wallet"

Here's a very simple question.. which is more likely..?

..That this change originated in a meeting that was discussing ways to benefit the advertiser or ways to generate more revenue?

[edited by: Shadoze at 7:34 pm (utc) on Aug. 14, 2007]

limoshawn




msg:3422146
 7:55 pm on Aug 14, 2007 (gmt 0)

That this change originated in a meeting that was discussing ways to benefit the advertiser or ways to generate more revenue?

Maybe they were discussing both.

I can see this as being a good thing for advertisers, I can certainly see this as being a good thing for me.

I have called Google more than once to try and find out why my ad would not move over from right-hand side only to find out that it had nothing to do with my ad or my bid or anything that was doing. My ad was stuck on the right-hand side because the ad below me was not bidding high enough for my actual cost per click to be above the threshold that was required to be above the search engine results.

The way I read this notification is, now I will have the opportunity to move my ad to the top spot above the search engine results regardless of what the person below me is bidding. You know what, I think that's a good thing even if it means that Google makes a little more money

droland




msg:3422153
 7:59 pm on Aug 14, 2007 (gmt 0)

This change concerns me. As I understand the google adwords auction (a generalized second price auction), an advertiser's (bidders) optimal behavior is to bid her value, ie if a click is worth $.20 to me, I should bid $.20. I can use this strategy confidently because the second price auction functions such that I only pay $.01 more than the bidder below me, ie I only pay what I need to pay, not what I'm willing to pay. I won't walk into a soda store on a hot day by telling the clerk that I'd pay a $100 for a soda if he's likely to say thanks for the info and charge me $99 rather than the market price of $.75.

This change google is implementing seems to change the rules drastically (at least for the top position). Now, instead of paying the minimum that I need to pay to be ahead of the next bidder, I pay some hidden "minimum" value that google is determining but not revealing. As Google is not a disinterested party in setting this minimum, I can only assume that they will set the minimum price to take some or all of the difference between what I have to pay to surpass the next lower bidder and what I'm willing to pay (in economic terms, this is the rent, ie how is the pie split).

I'm guessing that in this new system, my optimal behavior is no longer to bid my value (ie reveal exactly what the click is worth to me). I now need to make complicated calculations about how google sets the minimum bid for top position and figure out my optimal strategy. Why are they doing this?

Google's help system says it's about putting quality ads up top. That might be the case but it seems like a separate issue. They could certainly promote the high quality ads (based on ctr & landing page quality) above the search results while still calculating the actual CPC based on the second price auction system (the quality score is like this. it impacts your position but your cpc is still based on the 2nd price auction). The change in cpc-calculation will generate more revenue for google (at least in the short term) and make bidding more complex for everyone.

I hope I'm wrong but I think Google could provide a better explanation so we can understand the rationale for the change and know how to best adapt going forward.

david

Shadoze




msg:3422165
 8:12 pm on Aug 14, 2007 (gmt 0)

I hope I'm wrong but I think Google could provide a better explanation so we can understand the rationale for the change and know how to best adapt going forward.

You hit the nail on the head, it's not the change itself, but the fact that no one really has a clue what it's going to do, or when.

It's the secrecy, the total lack of info other than them stating they are going to do something but all you really get is a vague, at best, description of how the changes will be implemented. There is not another advertising medium I know of where the advertisers are given so little information to work with. This is PAID advertising not organic search.

justageek




msg:3422206
 9:03 pm on Aug 14, 2007 (gmt 0)

I can see this as being a good thing for advertisers, I can certainly see this as being a good thing for me.

It would be great for me as well...if it were an opt-in option.

Sometimes I may want to be on top. Most times I don't because of ROI reasons. I don't want someone above me to go away and then for me to be forced into the taxed position just because of my max bid says I can afford the tax.

JAG

limoshawn




msg:3422269
 10:43 pm on Aug 14, 2007 (gmt 0)

Sometimes I may want to be on top. Most times I don't because of ROI reasons.

JAG,

I couldnít agree more. There are many keywords that I don't want to be in the top position for. I think that the solution to that would be the "position Preference" option.

Soze




msg:3422304
 11:51 pm on Aug 14, 2007 (gmt 0)

Received some great news from Adwords. I chatted with them online and asked about the threshold min cpc that the ads would be subject to. I asked if it was going to change, or if it would be the same as the min cpc threshold that exists now.

As you know, there has always been a min cpc value that was needed to get the top spot. This isn't anything new. Your actual cpc was compared to it and if it was high enough, you would move to the top.

What's changing is that now the system is comparing you max cpc to the min cpc required. That threshold min cpc is going to be the same as it is now. So, if you are currently at the top, you are obviously already meeting that threshold, so you shouldn't anticipate a change in cpc because of it. However, you may see one if ads below you start upping their bids to meet whatever their threshold is. The threshold is different for all ads and is based on quality.

Rehan




msg:3422342
 12:51 am on Aug 15, 2007 (gmt 0)

Soze, that's the understanding I have too... but I think there's one other important change, as noted in the FAQ [adwords.google.com]:

Your actual CPC will continue to be determined by the auction, but subject to a minimum price for top spots. The minimum price is based on the quality of your ad and is the minimum amount required for your ad to achieve top placement above Google search results.

I take this to mean that after the change, the actual CPC of an ad on top will be at least as much as the threshold value, and it will not necessarily be related to the bid of the advertiser below you. In many cases this will indeed mean a higher CPC for top ads.

[edited by: Rehan at 12:52 am (utc) on Aug. 15, 2007]

Soze




msg:3422454
 5:38 am on Aug 15, 2007 (gmt 0)

Well, your ad already has to be atleast equal to the threshold value in order to be on the top, so why would it matter?

Regardless of what the threshold is, you are obviously paying atleast that amount now if your are on top, so you will continue to be paying atleast that amount after the change.

If you are bidding .2, paying .07, and the new minimum bid is the current threshold, which for example is .05, then that .05 doesnt change anything. Whether it's there or not won't matter, because you are already paying more than it.

However, you will see a rise in CPC if you are currently on the side, and bidding, for example, .20, and paying .07, and the threshold is .15. You will automatically get bumped up to the .15 and move to the top. If you want to remain on the side and paying .07, you would have to move your bid to .14.

The only problems that should arise are for ads that are on the side and want to stay on the side. You may run into a situation where you want to remain on the side, and the only way to do so is to lower your bid. However, lowing your bid may cause the ad below you to jump ahead of you.

If this is all as it seems, it's really just a way to push as many quality ads as it can to the top. The ads on the top get way more clicks, and will cost more than they would at the side, so it's a win for Google in terms of cpc and volume of clicks.

Green_Grass




msg:3422479
 6:27 am on Aug 15, 2007 (gmt 0)

What happens when they start doing this for position 2 .

Then for postion 3 ...

It is definitely a way forward to make more money for ...G

We just have to grin and bear it.

Rehan




msg:3422488
 6:47 am on Aug 15, 2007 (gmt 0)

Well, your ad already has to be atleast equal to the threshold value in order to be on the top, so why would it matter?

If there is a significant gap between the threshold and the bid of ad #4, then it does matter. For example, if your ad is in position #3 with a bid of $0.40, the threshold is $0.30 and ad #4's bid is $0.20, then you'll end up paying $0.30 under the new formula instead of $0.21 with the current formula.

[edited by: Rehan at 6:48 am (utc) on Aug. 15, 2007]

toddb




msg:3422711
 12:54 pm on Aug 15, 2007 (gmt 0)

Rehan I think that is the rub on this one. But it would apply only to the top position.

Soze




msg:3422756
 1:37 pm on Aug 15, 2007 (gmt 0)

Rehan, that gap can't exist if you are already on top. It is impossible for it to exist. You can't being paying less than the threshold now and be on top. You actual cpc must be >= to threshold to be on top.

If the threshold is .30 and you are bidding .40, and the guy below you is bidding .2, under the current formula you wouldn't be on top anyway because you aren't paying .3, but rather .21.

If you are paying .21 as in your example, then you are on the side anyway. Under the new formula, you would move up to the top and then pay .3. If you don't want to be on top and paying .3, then just drop your bid to .29 and you will go right back to being on the side and paying .21.

The new min bid cant cost people who are already on top any more than it does now, because if you are on top now, you are already paying equal or more than the theshold. Otherwise you wouldn't be on top.

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