How specifically does CTR factor into ad rank?

[caspernova]

How does CTR factor in to ad rankings? I've heard that if someone has a 0.5% CTR and i have a 1.0% CTR, i have to pay twice as much to rank as high as them...

But what if i have a 15% CTR and they have a 1.0% CTR? Does that mean that i have to pay 1/15th that they do? And what CTR does it go by; the keyword CTR, the campaign CTR, or the account CTR? and on what time scale does it calculate the CTR? That day, or "all time"?

[FromRocky]

I think you're desperately wanted to know about CTR and ad rank since you posted this thread twice. Even though, no one gives you the answer. If you do a search in this AdWords forum you will see AWA or someone that has discussed about these topics.

I'm trying to give you a hand here even though I haven't been updated for the last three months. Hope I didn't miss anything.

Ad Ranking which is used to determine the ad position is based on the Max. CPC and CTR for a specified keyword. Thus, each keyword or phrase has its own ranking number.
Campaign CTR or account CTR has nothing to do with ranking for the ad position.

if i have a 15% CTR and they have a 1.0% CTR? Does that mean that i have to pay 1/15th that they do?

Assume that your Max. CPC is $1 for this keyword. Your Ranking number is 15x1=15. Your competitor has to bid at (15+0.01)/1=$15.01 as Max. CPC for the keyword to rank above you.

Note that there is a difference between "have to bid" and "have to pay". "Have to bid" means set the Max. CPC. & "Have to pay" means pay the actual cost.

Actual Cost is based on your CTR and the ranking number of the ad one below. To illustrate the point, an example is made:

Ad 1 - (you) CTR=15%, Max. CPC=$1 --> RN=15x1=15 -->Position 1
Ad 2 - (your comp1) CTR=1%, Max. CPC=$5 --> RN=1x5=5 --> Position 2
Ad3 - (your comp2) CTR=2%, Max. CPC=$1 --> RN=2x1=2 --> Position 3

Actual cost per click:
You (5+0.01)/15~$0.34 even you set at $1
Comp1 (2+0.01)/1=$2.01 even the max. CPC is $5

Now if your competitor (comp1) wants to take number 1 position, the actual cost for you and your compertitor will be:
You (2+0.01)/15=$0.14
Comp1 (15+0.01)/1=$15.01 (this case is 100 times as your cost)

Hope I have answered your questions.

[toddb]

Rocky that is fantastic. Thanks.

[caspernova]

THANK YOU SO MUCH! That's exactly what i needed to know. I'm also sorry to the forum members for posting twice, i just really really needed to know - i was ready to make a new account and start a new campaign because of the low campaign CTR! Thanks again Rocky.

[patient2all]

Rocky,

Thank you, I've never seen the computations made so concise that even I understood them. To make it 100% complete, can we add an answer to Capsernova's question about the time frame for keyword CTR?

Sadly, I believe the answer is "all time". Which of course can increase or decrease as time passes.

patient2all

[eWhisper]

Nice post, FromRocky.

Thank you, I've never seen the computations made so concise that even I understood them. To make it 100% complete, can we add an answer to Capsernova's question about the time frame for keyword CTR?

While all time is used in the CTR formula, the past 1000 searches are weighted more heavily. There is another entire formula for determining CTR, but it's a pretty heavily guarded secret by G.

[toddb]

This weights CTR too much.

I have a very high CTR ad 43%. (yeah, can you say click fraud?) It is at .10 CPC. This gives the second place ad a factor of $4.30 with CTR times bid. We do not know CTR or bid but (4.30/43-my CTR)=.1 which is what i am paying.

I made a new add to test. It was running together. Checking this theory at the same time. I was able to be in first place for both ads at .30. New text ads do not get a huge bonus CTR right away. Either that has changed or this model over weights CTR by a lot.