I have a theory about why this has happened.
When AdWords made their recent changes and hit my competitors with inactive terms that didn't meet maximum bids...my competitors increased their bids to the new outrageous minimum prices. That means that the old formula is making me pay more money: my quality score + my bid (compared to my competitors new quality score and outrageous minimum bid) = lower rank for me (because his bid is so high he ranks higher now) but higher bid (because my maximum bid has more competition now) but better CTR for me (because his quality score is still bad).
I'm really tired as I'm writing this but it just seems to make sense.
The net result is fewer bidders, but a higher return for the KW portfolio.
I imagine quality enters into the picture somewhere, but I haven't seen any evidence of it personally. Any QS changes -- at least thus far -- seem to come as a result of manual overrides rather than a bot's reassessment.
I believe your analysis is largely correct, but it generates at least one question. Why get the low bidders "out of the way", rather than offer them a bid that would allow them to participate in the portfolio in a meaningful way?
I can't conceive an answer to that question myself. Which then by default lends some creedance to the concept that they site is viewed by Goolge as "low quality".
Why get the low bidders "out of the way", rather than offer them a bid that would allow them to participate in the portfolio in a meaningful way?
Great question. Perhaps the odds that low bidders will actually bite on significantly higher minimum bids are really slim. In other words, from a revenue standpoint, asking someone to increase from $.05 to $.50 is the same as asking them to increase to $10. In either case, the bidder is gone, so Google figures that from a legal, PR, and customer inquiry perspective, it's better to just cut the lowballers loose than to make the profit optimization algo totally transparent.
Or maybe there is a quality element that comes into play at the low end. Or maybe low bidding tends to be a predictor of low page quality, so cutting the low end loose is congruent with improving quality.
All I can really say is that bid behavior and the bid landscape for the KW seem to be factored in the 'quality' score, based on my observations.
There is more to my theory now and I am continuing to do more homework on this. A couple of days ago, I did a half a dozen searches on my search terms. At one time, each of my search terms would have been considered as unique and the cost per click would have been lower because they were not as popular as the shorter versions of the same search terms. What I discovered is that AdWords is now taking full advantage of "expanded match" to assign the searches to the shorter, higher priced words. My rep has been hinting at this for a few weeks but I refused to believe this was true as it totally messes up my strategies for setting up my campaigns.
What's the point of bidding on "buy red widgets" when Google is going to make me pay the higher priced bid for "red widgets" anyway?
Part of my problem is that I don't use the default bid. Instead, I have recently adjusted my bidding on certain terms to stay in certain positions. Google has taken full advantage of this to ignore my other search terms and instead of recognizing them at the lower bid, they throw them under the higher priced term.
Is anyone else seeing this trend?
Also, I wouldn't assume that shorter phrases are more costly than longer ones as a rule. In my experience, CPC is more driven by probability of conversion; so if a long phrase shows that a user is actively looking to buy a product, it's worth more to the advertiser than a shorter phrase that might be used by searchers who are just researching. In your example of "buy red widgets" vs. "red widgets", I can easily see how the former would be more expensive as the searcher is actively looking to convert.
-Shorebreak
My suspicion has always been that Google knew we were aggressively targeting bargains, both in terms of the KWs and positions, and raised our prices to leave a little less consumer surplus on the table. This is just good business and I can hardly blame them. My only problem is that is was done w/o warning and under the auspice of a 'quality score'. I now regard all of my Google volume as high risk, and I make my value/spending decisions accordingly. Net result: I have shifted a lot away from Adwords.
Sorry, a bit rambling and off-topic, but I thought my theory needed some background.
Here's what is happening to me. I have one adgroup with the broad term red widgets at $5 and I have the phrase "buy red widgets" at $2. I did a search on "buy red widgets" and checked my impressions the next day. Zero impressions. I did more tests under similar circumstances. What I discovered is that Google used the excuse for "expanded matching" to show the ad for the higher priced broad term red widgets. Had I clicked on my own term, I would have paid the higher price of $5 instead of the $2 I bid on the phrase "buy red widgets".
I did this test over and over. I got confirmation from my Adwords rep that my theory is correct.
Yes, theoretically broad is broad, phrase is phrase and exact is exact but AdWords is pushing the limits of "expanded match" as an excuse to use the higher priced term instead of the lower priced one.
I'm not a target for AdWords...they are not trying to put me out of business...I am considered a good client. Its not just me. I started checking my client accounts and the same thing is happening with them.
I pulled my search term history and it has not always worked this way. I didn't notice this until my costs doubled last month when my ads were only showing 48% of the time compared to 100% of the time...my CTR's were twice as good as they were the month before and my ranking was just slightly lower. None of that made sense. It took digging deeper to find the issue with expanded match taking high priced credit for any impression or click from my lower priced search terms.
Non?
Clearly there will be some fudging of actions taken to cover up the real algorithm decisions so we cannot guess accurately and im sure this is a Google policy. I do believe that your domain will be put in a certain box based on a number of factors and then treated accordingly in the portfolio style that Pdivi mentions there. That box will depend on loads of factors, brands and the like being in the best ones. If you fit into a stereotype then that box you will go hence some being caught up wrongly.
Google surely have a good hand in what keywords generate conversions and the inventory that holds the most value as well as the inventory that shows the most promise. If you know where the value is and know there is mileage in it for more revenue then you will grow that area just as Google are doing. Previously a good quality score came from a good ctr or ultimate CPM. That was easily manipulated so new methods allow for apparent good box advertisers to get into good positions whilst others have to pay through the nose. Those paying through the nose push the prices up on the other advertisers and Google has finished its job of getting more out of that keyword.
