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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?
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.
"quality is weighted more heavily now and in the new system
Quality - google should be more specific here!
It would be nice to have a matrix where I can see how I score on all quality variables. I want to know what I do right and where I need to improve or add something.
Too bad google will never let us see quality variables.
All of our campaigns with very targeted keywords (the ones where I want to be in the top results) have average (actual) CPCs between .85-$1.25. Our overall avereage CPC for these campaigns is around $1.
It seems that for most of our keywords/ads in these campaigns the top placement "threshold" is around .50-.75. We have thousands of keywords that aren't hitting that threshold with their current actual CPCs, but have higher Max CPCs above those thresholds. Theoretically these should all earn a top listing under the new system and the actual CPCs would rise to the minimum threshold (approx. .50-.75).
If this is the case, we would have a tremendous amount of new clicks between .50-.75. For us, having top placement means 3-4x CTR relative to being to the right. Even though our CPC would go up for the affected terms, I anticipate that the additional volume of less expensive clicks will decrease our overall average CPC, and produce many more clicks. A very good thing.
Obviously this logic doesn't apply to all accounts. And some people don't want to be in the top positions because the decreased conversion rate and higher cost outweighs the value of the additional clicks.
I'm curious if anyone sees holes in this logic or if they think things would work the same for them.
This change is apparently in response to advertisers complaining that they cannot achieve top placement on terms with lower CPC's. As clicks are cheap on some kw's advertisers are falling down the side of the page only and are not appearing *above* the organic results in one of the top spots, no matter what their bids. This is due to the fact that position is currently determined by actual CPC x Quality Score. In order for lower value terms to meet the minimum threshold for a top placement they are changing the calculation for T1-T2 spots to
MAX CPC x Quality Score
Our rep stated that your actual CPC shouldn't change ('shouldn't' being the key term here) and that Quality Score will not be weighted any differently than it has in the past. By using your Max CPC (typically higher than your actual CPC due to the Adwords Discounter pricing scheme) it should push ads into top placements where ads weren't meeting this minimum threshold previously.
While this all makes sense to me, the actual impact would still seem to be far greater. Our rep DID concede that Google cannot gauge how aggressively competitors may bid for these top placements, and that *theoretically* aggressive bidding could pull costs up all the way down the line and this would be something we'd have to monitor.
Though Google is apparently doing this in response to advertiser complaints it would seem that ultimately they will benefit substantially from these changes and the more aggressive bidding strategies that it opens on top placement.
When asked for some ideas on strategically managing the top placement algo change I was told it would be best to leave Max CPC's as they are for now and wait to see how bids and placements shift once it's rolled. He suggested two weeks would be optimum, but I certainly wouldn't sit idly by for 14 days if costs suddenly cranked up. He also suggested using the Position Preference tool to keep out of the T1-T2 placements as a means of controlling cost--but the reason we've avoided this tool in the past is that if your bid places you in a non-preferred position your ad will not be displayed AT ALL--which to me is potentially as dangerous as paying too much.
In any case, I do seem to understand the reasoning behind this and the calculation a bit better however I'm still pretty concerned about what this is going to do costs and management of our accounts overall.
Our rep did state the change was likely to roll within the next 2 weeks but that we would receive notification when it's live.