eWhisper - 8:23 pm on Mar 27, 2013 (gmt 0)
It seems there's two sides to this discussion - one is control and the other is QS.
As for control; negatives are amazing. We have many accounts with more than 100k negatives in them (and some are often 1 million - don't try this without the API). Google changed the negative keyword max from 5000 to virtually unlimited a while ago. These large negative lists are mostly for control - not for QS reasons.
From a control standpoint, you might use negatives to block ads from showing in one ad group so they show in another one. This is common when you have ad groups that are general (say website hosting); others that are discount based (cheap website hosting); and others that are specific (vps website hosting). By using your negatives to 'shape' which ad shows; your overall CTR and conversion rates should go up. In fact, if you don't use negatives in that situation, you will probably have some of the 'wrong' ads shown; and if someone is looking for a VPS, you never want to show them a general hosting ad. So using negatives for ad shaping based around what type of ad the end user should be seeing is essential in many accounts.
There are many ways you can control ad displays in this way; like some companies have absolute monthly budgets. So you might have an brand, exact, phrase match, and broad/modified broad campaigns. In this case, you'll spend all you can on your broad, exact, and phrase and use the broad to help you hit run rates. To make this work; you need all of your phrase match words as negatives in the broad campaign; and all your exact match words as negatives in the phrase campaigns.
For larger accounts, I'm a huge fan of the negative keyword lists as I often find that the negatives are not applied correctly to multiple campaigns. If you download your campaign negatives, and put them in a pivot table - look at how many negatives you have by campaign - seeing high level numbers can be enlightening.
From control to QS... So negative words won't directly affect individual word QSs as they are only calculated when the query matches the word. However, part of QS is overall QS for the account. What negatives will do is block these irrelevant queries so that you don't show for low CTR terms that don't matter for you, and then the entire account's CTR/QS will go up; which then indirectly helps a keyword's QS used in the auction. Its a bit convoluted, and since overall history isn't that huge of a deal for most accounts; the odds of you actually noticing negatives helping QS is pretty low.
So, I do find negatives are very important; but they are more essential from ensuring the correct ad shows for each query as opposed to trying to eek out slightly higher quality scores.