• Ad position is determined by Ad Rank which is calculated as bid x quality score.
• CPC is calculated by dividing the Ad Rank of the next highest advertiser by your quality score (and rounding up to the nearest $.01).

But before fighting for position or even worrying about CPC, each keyword must earn eligibility into the real-time auction that takes place when someone enters a search query that Google deems potentially relevant to your keyword.

There are some interesting dynamics in that part of the process that are worth understanding if you really want to optimize your AdWords account and maximize your results.

In part 1 of this series, we looked at how quality score helps you to focus on resolvable issues in your account, and warn you about keywords where success may be difficult. In this installment we’ll learn more about how quality score effects auction eligibility.

This series is based on material from the new book Quality Score in High Resolution and is a preview of the Quality Score session at the upcoming SMX Advanced in Seattle.

Keyword Magnetism

A lot happens behind the scenes when someone clicks the ‘Search’ button on Google.

In a split-second, AdWords has to decide which keywords from which advertisers should compete for the available PPC slots on the search results page.

Given the massive number of advertisers, volume of keywords, effect of match type, and complexity of the search queries they see, the fact that they can figure it out at all is impressive and that they do it within the milliseconds before the results appear is truly mind-boggling.

Think of keywords as being magnetic. Exact match keywords are specialized magnets that only attract very specific search queries. Phrase and broad match keywords have larger levels of magnetism and therefore attract a wider range of search queries.

The phrase match keyword ‘cheap dog food,’ for example, should be strong enough to attract any search query that includes at least those three words, unless:

• The query is excluded due to a negative keyword
• The search originates in a geography that is outside the defined targets
• The keyword bid is below the minimum required bid
• Some other setting or aspect of performance history blocks the keyword from being eligible

Increasing the bid or quality score for any keyword strengthen its magnetism, extending the range and increasing the quantity of search queries it can attract. If each keyword is surrounded by a moon-like orbit of search queries, as the magnetism gets stronger the keyword is able to reach out to more and more queries.

This is best understood by example:

• For the phrase match keyword ‘cheap dog food’ you have a $1 bid and a quality score of 6.
• Average impressions = 1000/day, average position = 4, average CPC = $0.65
• They keyword is eligible for some potential auctions, but misses eligibility for others.
• Quality score goes up to 7.
• For search queries where ads where already showing, you earn better positions and enjoy lower CPCs.
• This new higher quality score makes the keyword eligible for auctions involving search queries where it was previously ineligible. This happens because each search query has a minimum required bid for any keyword and that minimum is based on your quality score. With a quality score of 6 the minimum bid for a particular search query might have been $1.10 – so the keyword was ruled ineligible. But now that it has a quality score of 7 the minimum bid for the query is only $1.00 so the keyword is entered into the auction.
• This happens for any number of these ‘far away’ search queries, so after entering the auctions it wins positions and ads are shown for some of them. Your total impression volume will rise.
• Since your keyword is just creeping over the bid requirement to become eligible for these auctions, it’s likely that many other advertisers have far higher Ad Ranks for those search queries (each competitor is entering different keywords with different settings, bids, and CTR histories into these auctions) so in many cases you’ll earn relatively low positions on the results pages.
• Lower positioned ads tend to get lower click-through rates.
• And because it’s likely that your ad rank is lower than more competitors, and your quality score for this query (link) might be a bit lower too, you’ll tend to pay higher CPCs on these newly conquered search queries than the existing keyword average.
• The impact of these new search queries for which you gained eligibility by increasing your quality score is a rise in the average position, a decrease in CTR, and a bump up in the average CPC reported for this keyword.
• Including both existing and new search queries where the keyword is now displaying ads, average impressions rise = 1400/day, average position = 5, and average CPC = $0.88

So you earned a better quality score – which was a goal – and in some cases will be rewarded with more traffic but worse performance metrics.

It’s unlikely they would be dramatically worse, but seeing the theory play out in this example helps add dimension to the idea that search queries are more important than keywords and at least for those keywords consuming the largest shares of your budget, or having the highest CPCs, you need to actively monitor the search query reports to manage down to that level.

These results may be unexpected, but it’s impossible to categorically state that they’re undesirable or negative. They’re just a strange byproduct of the math – position and CTR are averages and when you enlarge the circle of search queries those at the outer edges lower these averages while increasing the total search volume.

You can only decide if the overall effect is positive or negative by looking at your average ROI and unit volume as compared to your goals.

Magnetism Control

It is surprising to most people that better quality scores produce these two simultaneous effects:

• Performance improves for search queries that were already matching
• Key metrics will be lower-than-average for many of the newly eligible search queries.

There is no way to get the benefits higher quality scores provide on search queries you’re already winning without at least potentially experiencing the degradation brought about by newly eligible search queries.

All you can do is keep a close eye on your search query reports and when you see new search queries that may be some of the new ‘remote’ queries for which you’ve recently become eligible, either create negative keywords to avoid them or add them as new keywords so you’ll be able to see their quality scores, bid them independently, and track their performance in order to control them more precisely.

It’s important to reiterate that not every new search query you gain eligibility for when quality score increases will bring lower-than-average positions or higher-than-average CTRs. Each query is subject to its own competitive marketplace, CTR history and expectations, and other factors. New queries may be at, above, or below these averages.

For the advanced search manager, or anyone spending huge sums of money on AdWords, this detailed look at one small aspect of ‘how it really works’ clarifies yet again the limitations we face based on a reporting system built around averages.

If we could see the impression counts, quality scores, CTRs, average positions, and CPCs for every search query our keyword interact with, we’d be in a far better position to manage our budgets responsibly and far more profitably.

In the next post in this series, I’ll dig deeper into that theme, and explore more of the ways that a lack of transparency, specifically related to quality score, makes it difficult or impossible to control our own fates and budgets in AdWords.

This score has impact. It determines how often your ads are shown, where they appear, and how much you pay for every click they generate.

The process by which these scores are determined is not clear – all we have is a vague set of explanations we’re asked to accept, and loose set of clues as to the behavior that they suggest in order to earn good or even great scores.

The power and complexity of quality score prompted me to spend a great deal of time over the past few years learning how it really works, determining the specific ways in which it impacts our results, and documenting the strategies and tactics that enable advertisers to better control their own fates and budgets.

Google was kind enough to assist, granting interviews and answering questions by email so many of the inscrutable elements of the system could finally be explained. The result is a book called ‘Quality Score in High Resolution‘, scheduled for first release in June 2011.

For the next few weeks, I’m going to discuss some of my most interesting discoveries and conclusions in a series of posts here on Search Engine Land. At the upcoming SMX Advanced in Seattle, I’ll present the ’5 Biggest Surprises about Quality Score’ at the opening session of the paid search track.

Quality Score Is For Your Own Good

One of the things that struck me as I gathered and organized all the facts (and set aside a lot of myths) about quality score, was that broadly speaking the strategies and tactics that produce the best quality scores also produce the best economic returns. In other words, the steps Google is trying to get you to take to improve quality score really are in your own best interest.

More than anything else, quality score measures click-through rate – we all know that by now. Obviously, a higher CTR means you get more visitors and hopefully more revenue. But aiming to ‘increase CTR’ is a generic goal and one that doesn’t provide specific clues as to how to improve performance. But quality score is not driven by the ‘blended average’ click-through rate metrics that AdWords reports in the AdWords interface.

Instead, it’s determined by a more focused set of CTR measures:

• How each keyword performs with each different text-ad in its ad group,
• How the display URLs that appear in your ad copy perform across all the ads that share them,
• The aggregate and historic CTR performance of all keywords in the account, now and previously,
• How performance varies based on the unique search query matched to the keyword,
• Plus other similarly nuanced measures.

By understanding exactly what Google is measuring, the door opens to taking specific actions that can improve the metrics that really impact quality score. And produce better economic results too. A couple of points to consider:

• Paying attention to keyword and text-ad pairs, instead of thinking of those as two separate elements, forces you to create smaller, more tightly targeted ad groups because otherwise you can’t control which ads are matched to which keywords.
• Paying attention to aggregate and historical performance forces you to accept that a bunch of poor performing keywords in a ‘testing’ ad group can impact the results of your best performing keywords; and the damage done by a poor search manager can linger long after they’re gone.
• Paying attention to display URLs forces you to think about that generally ignored variable, the clues you’re sending to searchers, and the consistency of your visible URL assignments.
• Paying attention to geography forces you to think about the differences in how your product or service offering is being accepted in various parts of the country. If you never get an order from Arkansas, why are your ads showing there?

These are just examples. The point is that quality score, if we know how it really works, gives us a new perspective on the elements of our campaigns and ways we can think about and improve them.

AdWords Is Telling You What Not To Do

I think the biggest gift quality score gives is the idea – if you’re open to it – that you shouldn’t bid on every keyword that you think is somehow relevant to your target market. There are keywords, often many, that make sense to you but that despite your best efforts don’t earn respectable quality scores in your account. (Let’s say anything less 6 is not respectable.)

When this happens, there are three possible explanations:

1. You have more work to do improving the attributes that really matter to quality score. Most people seem to assume this is their only option.
2. AdWords could be making a mistake and assigning an incorrect quality score or applying some bad or mistaken information. That happens, but rarely, and if you can prove it you should take your case to your AdWords representative.
3. The keyword in question just doesn’t work for you, and it should be paused or deleted. Prospects are telling you (it’s their actions that Google is measuring) that for whatever reason the queries being attracted or the ad copy you’ve written or the geographies you’ve targeted are not pleasing them. In effect they’re asking you to stop showing them uninteresting ads, and stop wasting your money – on the keyword as currently configured.

Thinking of it that way, maybe you’ll be inspired to find a better ad group organization and write better ad copy. Maybe you’ll review your search queries and try again with slightly different versions of the keyword with different match types. That can often work wonderfully.

But sometimes the right response is to say ‘thanks for pointing that out’ and turn off the keyword and spend your energy and dollars on the many more productive keywords in your account.

In the next installment, we’ll examine how quality score determines which ad auctions your keywords are eligible to enter, and the unexpected ways that increasing quality score can lower average positions and increase average CPC’s.

The change Google has made isn’t just to the user interface. They’ve changed how search works by dramatically increasing the power of Google Suggestions. And most importantly they’ve changed the search experience which will undoubtedly change the way people behave and react to the results they get from Google.

Search marketers—of both the paid and organic varieties—are going to feel the impact of all these changes.

Instant suggestions

Watching a Google demo of Instant, or when giving it a casual try yourself, you can’t help but be struck by the way the screen is constantly updating and adapting as you type. But if you pay close attention to what is really happening you’ll notice that all the action on the page is driven by the fact that Google Suggest is constantly executing on its top suggestion—a suggestion that usually changes (but not always) after each new character is typed.

Last night my son needed to gather and print some articles for a homework project. Using his query as an example—a search for “marine pollution”—let’s see how Google Instant really works and begin thinking about the implications for search marketers.

For the sake of this examination, we’ll type slowly enough to allow the screen to react to every single character. In the real world people don’t type that slow, and at least in my experience Google Instant either needs some time or is engineered to avoid the pointless flashing of results. So many searchers wouldn’t see all of the steps we’re about to review.

Type “M”—Suggest = mapquest

The first suggestion is that we’re looking for MapQuest. And there isn’t even a house ad for Google Maps! I assume that Mapquest is the most popular search in the world that begins with the letter “M.”

Or is it? One would expect that these suggestions are personalized in some way, based on the user’s search history, the geography of the user, the day or time of the search, or the contents of the last few messages that landing in your Gmail account (just kidding on that last one). Does everyone get mapquest for “M”?

What I find most interesting about the way Suggest is being used is that it’s 100% focused on the first suggestion in terms of the delivered results. When this was just a suggestion list, first is first. But when actually assuming that is what I want, it seems like an overweighted bet.

The second suggestion is “myspace” and the third is “msn.” Why not serve up a result set that is a weighted mixture of the results for these top three? Wouldn’t that increase the odds that what I wanted was “instantly” available?

Type “Ma”—Suggest = mapquest

Here’s proof that it’s not character-by-character instant. Adding the “a” changes nothing. The suggestion remains “mapquest” and neither organic nor paid results change.

This makes the focus on the first suggest seem even stranger to me. Google had already served me a full page of Mapquest results, it knew I paused for longer than 3 seconds so I saw them and didn’t click but rather kept on typing. Doesn’t that suggest that their suggestion was wrong? Aren’t the odds of “myspace” or “msn” even higher now? Shouldn’t the results start hedging their bets?

Type “Mar”—Suggest = marriott

When another character proves that I don’t want mapquest, Google Instant suggests “marriott.” They obviously know that I need a vacation. Or marriott is the top “mar” search in the world.

As others have pointed out, brands do well in the world of suggestions—both Mapquest and Marriott are brands and probably two that spend a lot on AdWords, though in this case only an ad for Marriott has appeared.

The runner-up suggestions were “marshalls,” “mario,” and “marathon grill.” More brands. This is likely simply due to the click density that these type of “head terms” get as compared to the zillions of long tail queries that begin with “mar” rather than some overt brand favoritism. But the effect is the same—brands will enjoy greater impression counts and likely some collateral incremental clicks.

Type “Mari”—Suggest = mario

As I continue typing and get closer to one of the existing suggestions, Google Instant goes right for it. Paid ads appear for the first time. There doesn’t seem to be a consistent number of characters before AdWords ads appear—with “R” it’s just one but in many other cases it’s 4 or even 5.

Type “Marin”—Suggest = marines

Type “Marine”—Suggest = marines

Type “Marines_”—Suggest = marine corps

The trend continues, as more characters that support the top suggest yield no instant changes. It’s interesting to see (and a consistent behavior) that spaces do reset suggestions. So when I fail to type the “s” they’re expecting the suggestions and results are reset, although in this case to the derivative “marine corps.”

Now someone needs to come up with the clever name for winning two suggestions in a row with different keywords from the same website!

Type “Marine P”—Suggest = marine parts

As another typed letter proves suggest wrong yet again, it doggedly keeps trying. Switching to the other kind of marine, the suggestion now is that I learn about boat parts. “Marine plywood,” “marine paint,” and “marine power” are the next suggestions but again 100% of the organic and PPC results focus on “marine parts.”

At this point I’ve typed 8 characters (including the space) and been shown five different sets of results, none of which have a thing to do with the subject I’m looking for. I’m sure they’ve all been statistically sound probabilities. But as a user it feels a little bit like talking to someone who won’t let you finish a sentence even when you have not provided enough data to reasonably make any response.

In terms of search marketing, there might have been something along this path that caught my eye and got a click, but in that case I was diverted from my intent and may or may not ever go back and pick up the original trail. On the other hand, I may be tiring of all these incorrect results—in a way I may come to think that I’ve done at least 5 Google searches and they’re still not even close to what I want. It’s getting annoying and tiring. Or I might like the responsiveness and their attempts, they may learn more about me over time and get better at it, and I might double my use of Google.

I’m guessing there will be people in all three camps, and the eventual percentages are what we’re all waiting to know.

Type “Marine Po”—Suggest = marine power

After I enter this character we’re getting somewhere. Another page of incorrect results but my intended query is now #3 on the suggestion list.

Type “Marine Pol”—Suggest = marine pollution

We’ve arrived.

Google Instant serves up results that satisfy the original intent, and the paid ads to compliment that query.

Note that when I type at a more normal pace, the screen refreshed only about 3 times before I got to my desired results. And I can’t say that the results would have impacted me at all because I was going very deliberately towards my goal. Again, this test may not reflect the experience that most searchers will have in the real world. A range of experiences and reactions is probably what we can expect.

Observations

The conversion of Google Suggest into Google Presume has gigantic implications beyond the obvious. I think it means that more people will see, and likely settle for a smaller pool of results. Both those that were diversions from and those that are “close enough” to the original desired results. If this is true then tracking and becoming relevant for the words and phrases in Google Suggest just became the #1 goal of search marketers everywhere.

What’s the URL of that new site where you can upload your current keyword list and they’ll return a harvested list of every suggestion made for every character combination seen on the way to that keyword? I don’t know yet but am sure we’ll all hear about it soon.

On the other hand, users might react to the power they now have and take more control rather than taking more suggestions. They may see the presumed results but realize that it takes very little effort to keep refining the query, seeking their original goal or perhaps even experimenting around it. They may in fact get more results, better results, and extend or at least keep alive the long tail and results diversity.

This is the great unknown. How will users react and adapt their search habits. That’s the one that will undoubtedly change over the coming weeks and to which search marketers will have to react just as surely as we have to react to the UI and algorithm changes of Google Instant.

Here is a video of my entire experiment:

Click here to view the embedded video.

I also like him because there’s a Joe Biden-like quality to the way Dr. Varian delivers the truth (and I mean that as a genuine compliment.) His communications are based first in facts and only secondarily packaged and limited to fit the party line. The result is that along the way we learn, or have confirmed, a truth or perspective that the PR flacks and marketing spinners would probably rather have remained unspoken.

Dr. Varian’s first major communication was the ‘How AdWords Auction Works’ YouTube video. It’s the “Subterranean Homesick Blues” of AdWords videos—a long complex stream of previously unknown truths which demands repeated viewings.

Click here to view the embedded video.

In it, Dr. Varian explained the math behind the calculation of both position and CPC in AdWords. Suddenly we could quantify the economic cost or benefit of Quality Scores and Quality Score changes.

As Paris Hilton would say if she ever spoke without irony, “that’s huge.”

Now in a post on the AdWords Blog Dr. Varian and his team report that they have verified that conversion rate doesn’t vary much based on ad position. This is critical information in our quest to intelligently set bids and build bidding strategies. Calculating the “right” bid without knowing that conversion rate was relatively constant was difficult, to put it mildly.

If conversion rate is relatively constant, then revenue per click is relatively constant (we’ll assume for the moment that basket size isn’t varying by position either). This means that if we can determine the variation in cost-per-click at different positions we can rather easily decide the “right” bid to maximize revenue or profit.

All of this means that Dr. Varian eviscerated one of the core assumptions about PPC bidding—that conversion rate varies dramatically by position—which was held by a lot of smart people and around which many an algorithm has been written.

To be fair, there are more than a few people who remain skeptical of Dr. Varian’s claim. I’ve seen blog posts and spoken to some smart and experienced paid search practitioners who believe they’ve seen data which contradicts his point.

Is Dr. Varian wrong? Are his claims too general? Are there marketplaces or situations in which conversion rate isn’t linear? Or was he able to hold the variables more constant, in terms of statistical analysis, than mere mortal paid search advertisers can because he has access to more and purer data? We don’t really know, but until proven otherwise I’m giving Dr. Varian the benefit of the doubt.

A new twist

But while the first impression is that Google’s release of this statistical analysis makes bidding easier, an aside Dr. Varian made as part of his explanation muddies the water again.

It’s in the comment where he explains that sometimes when you raise your bid your average position goes down. He says that as your bid increases the keyword you’re bidding on becomes eligible for new auctions. And in these new auctions, which you’ve just barely bid high enough to earn an ad rank that made you eligible, you’re likely to appear in lower positions, thereby lowering your overall average.

In other words, when you increase your bid, your ads should generally rank higher within the auctions where they were already showing—this is probably your intention when you raised your bid. But at the same time, a possibly positive but probably unintended consequence occurs: those same keywords with their new higher bids now trigger impressions for queries that they failed to trigger before. And for these new queries your ads are generally appearing in lower positions.

All of this is perfectly reasonable. The fact that the higher bid expands the range of search query eligibility is in line with what we know about the auction process, even if it’s a result many of us hadn’t considered. The problem is that it’s another example of AdWords giving us data that conceals what is actually happening. If you just looked at the data and made a reasoned analysis of it you would very likely draw the wrong conclusion. With a full understanding of the situation you’d know you really can’t draw any conclusion at all.

We’re buying advertising, getting data back which is ostensibly provided so that we can learn from our results and make rational decisions about improving our campaigns. And yet it turns out the data is inadequate and inconclusive. This isn’t the only situation where this is true, but it is a great example of how AdWords gives the impression of transparency while failing to provide the data we need to make smart optimization decisions.

Here’s what we now know:

• We bid on keywords and review reports showing our clicks, cost, revenue, and position.
• Along the way, we may raise or lower a bid to see the impact of that change on our results.
• The bid change not only affects our performance in auctions we were already entered into, but it also makes our keyword eligible for more or fewer auctions. But we have no way of knowing about our participation in these additional auctions – Google doesn’t offer an ‘auction count’ metric.
• The average position metric isn’t the indicator of impact we’d normally expect. When average position goes up, down, or stays the same after a bid change we have no way to correlate the two events. A basic assumption most of us had about bidding and reporting is shattered.
• For the same reason, we can’t draw any particular conclusions about resulting changes in our click volume or average CPC. Our bid change might be having the exact result we wanted – rising positions, more clicks, higher CPCs, and increased net revenue – when run against the same queries we were always matching, while at the same time exposing us to a whole new set of queries which turn out to be poorly converting wastes of money that lower our numbers to the point where it may be impossible to tell that our bid change largely had the desired effect but unfortunately came bundled with a horrible side effect.

Of course, we can simply look at the net result, conclude that our bid change was a bad idea, and reverse it.

But that’s not the way many of us believe we should have to manage our keywords or accounts. We’d like data to be provided at a high enough resolution so that we can make precise and deliberate decisions. If there are multiple auctions going on in relation to a single keyword, and we can make money in some but lose money in others, we’d like the data and options that would allow us to choose where and how we participate.

The fog is lifting

AdWords advertisers have spent a lot of time and money feeling around in the dark. The information Dr. Varian shared in his video and his blog post are very helpful points of light. The new ‘Bid Simulator’ in the new AdWords interface is another.

It’s great to see Google sharing this information, and providing these tools. I look forward to this trend continuing to the point where paid search advertising on AdWords is truly a fair and transparent—although still competitive—marketplace. I think that’s where Hal Varian is taking us.

Google first introduced Quality Score years ago, but changes they rolled out in August of 2008 recently increased visibility of the score in the AdWords interface and via their API, and a great new video by Google Chief Economist Hal Varian has pushed the discussion to a fever pitch.

Part of the appeal clearly is the fact that it’s a numeric value judgement Google is making about our keywords and account configuration. Like PageRank before it, as a search community we’ve proven the ability to go slightly bonkers about Google numbers that indicate and/or drive our success.

But just how important is Quality Score, and how significantly should it factor into the way PPC campaigns are managed?

It turns out Quality Score actually is a big deal, one that you ignore at your own risk and expense. The reason boils down to its inclusion in two formulas that Google uses to determine where (and if) your ads appear and how much you pay for clicks.

The first is the formula for Ad Rank. This is the math that decides which ads appear in the top slot, which sit in position #2, and so on all the way down to the point at which ads don’t get shown at all. The formula is:

Ad Rank = MaxCPC x Quality Score

Right there we see the importance of Quality Score. It’s equally as important as your bid in terms of when and where your ads are positioned. It’s the sweat-equity of PPC. A chance to out-gun the big spenders with your wit, savvy, charm and hard work.

So if your keyword earns a Quality Score of 20 and your nearest competitor earns only a Quality Score of 10 for that same keyword, your $2 MaxCPC will earn you a higher Ad Rank (and display position) than your competitor’s $3 MaxCPC. Your Ad Rank = 40 (20 x 2) while their Ad Rank = 30 (10 x 3).

If two competitors have similar or equal bids, obviously the higher Quality Score will earn a higher position.

And since there are often more advertisers than available display slots, the Ad Rank impact of Quality Score in many cases is the difference between an displaying and not displaying at all.

A discount card or a tax?

After Quality Score is used to determine the position of your ad, it is used again to calculate how much you’ll pay for each click.

The formula for your CPC on any keyword is based on the Ad Rank of the advertiser who scored just below you and your Quality Score.

Actual CPC = (Ad Rank just below yours ÷ Quality Score) + $0.01

Using the previous example, our Ad Rank was 40 while our competitors’ Ad Rank was 30. Our cost-per-click is then calculated as 30/20 + $0.01 or $1.51.

For every point (or fraction of a point) our Quality Score goes up, our cost-per-click goes down. And each rise in our Quality Score literally costs us less money on every click.

Assuming that the average Quality Score is 7 (which is our experience), earning a Quality Score of 10 is like getting a 30% discount. If your Quality Score is 5, then you’re paying a 40% per-click premium.

These are quite approximate values, because the numbers Google reports to us as Quality Scores aren’t the actual numbers they use in their calculations. We can assume they have much more precision than they share, and their numbers may or may not be exactly proportional to those they show us.

Click-through-rate drives Quality Score

There is no doubt Quality Score plays a critical role in your success with the keywords you buy. That part of the ‘hype’ is real.

But there is a challenge in sorting out all the claims of what to do about it. Google has listed the elements considered in their Quality Score calculation, but they have not precisely defined the role of each in their calculations.

As Google’s Dr. Varian says in his video, click-through-rate (CTR) is the largest component of the Quality Score calculation. Get a better CTR than your competitors and you should get a better Quality Score.

The CTR on the specific keyword is most important, but CTR is also tracked for each target URL and for the entire account—which means earning a high CTR for one keyword can have a broad positive effect.

The most direct and effective way to improve your CTR is by writing better text ads, and testing them to prove they’re better. Narrowing the breadth of keywords in any ad group so that all the queries those keywords attract are well suited to the text ads the ad group contains is also a very reasonable strategy.

Note that a great CTR from one keyword may be a lousy CTR for another. I don’t believe there are any absolutes so you can’t tell how good your click-through-rate is without knowing those of your competitors. You just have to strive for the best you can achieve.

Google has made clear that Quality Score is computed in real time and takes into account the search query and geography of the searcher. So if you get great CTR from New York and lousy CTR from Kansas, your Quality Scores should react accordingly.

Speaking at SMX West, Nicholas Fox, Director of Product Management at Google characterized the focus on CTR as the primary driver of Quality Score as relying on the “wisdom of crowds”—if lots of people “tell” Google that an ad is “high quality” by clicking on it, then Google believes it’s a high quality ad.

The non-CTR factors

It is my belief that most of the other Quality Score factors—including all the forms of relevance and the landing page items—are only seriously meaningful before a particular keyword has a well established CTR track record. In other words, Google use these factors to provide clues about the potential performance of a keyword that hasn’t yet proven itself. But once it has, they’ll go with the actual results.

The one exception is that landing pages which are deceptive, entirely unrelated, extremely slow or have other shady characteristics can lead to what is in effect a Quality Score penalty. Conversely, reasonably relevant and generally standard or even hyper-optimized landing pages can’t help Quality Score. In fact, Google has confirmed that landing page quality is not a factor when Quality Score is used in the Ad-Rank formula.

In my view the bloggers and tweeters out there who suggest that every keyword must be in the text ad and on the landing page, or that super-narrow ad groups, or any other non-CTR “secrets” are the way to achieve high Quality Score are mistaken. Like the SEO “keyword density” crowd of yesteryear, they’re reading more into the tea leaves that is there to be read.

Life in a Quality Score world

It wasn’t long ago that paid search managers could afford to ignore Quality Score in AdWords. Not Anymore. Today your low Quality Score keywords are lowering your volume and ROI, and your high Quality Score keywords are boosting your results.

You can monitor the Quality Score of your keywords easily in the new AdWords interface, and in a few of the better paid search management tools.

More on Quality Score from Google:

• What is ‘Quality Score’ and how is it calculated?
• How much do I pay for a click on my ad? What if my ad is the only one showing?
• Hal Varian explains quality score (video)