Hal Varian, Google’s Chief Economist, posted some pretty interesting details on how the conversion rate of an ad differs based on the position of the ad in Google. Google’s data shows that overall the conversion rate does not vary all that much based on the ad position. Hal said, if “an ad that had a 1.0% conversion rate in the best position, would have about a 0.95% conversion rate in the worst position, on average.”

It is important to understand how Google came up with this data, so here is the full post:

Advertisers often ask us how conversion rates vary with position. Everyone is aware that higher positions tend to get more clicks and therefore more conversions in total. The question of interest is how does the conversion rate (conversions/clicks) vary with position?

This is a tricky question for several reasons. Since Google ranks ads by bid times ad quality, ads in higher positions tend to have higher quality and higher quality ads tend to have higher conversion rates. Thus you may see a correlation between auction position and conversion rates just due to this ad quality effect. However, the real question is how the conversion rate for the same ad would change if it were displayed in a different position.

Another difficulty is that the average position number reported by Google is that it is an average over all auctions in which you participate. If you increase your bid, it is quite possible to see your average position move lower on the page! The reason is that when you increase your bid, your ad will appear in new auctions, and it will tend to come in at the bottom of those new auctions. This effect can be large enough to push your overall average position down. See this FAQ for more on this issue.

We have used a statistical model to account for these effects and found that, on average, there is very little variation in conversion rates by position for the same ad. For example, for pages where 11 ads are shown the conversion rate varies by less than 5% across positions. In other words, an ad that had a 1.0% conversion rate in the best position, would have about a 0.95% conversion rate in the worst position, on average. Ads above the search results have a conversion rate within ±2% of right-hand side positions.

The bottom line: conversion rates don’t vary much by position.

I would be incredibly interested in seeing from the larger agencies who manage thousands of campaigns and track conversions for each of those clicks, if they agree. I will see if we can have one of our columnists in this area do a follow up with their own data.

About The Author: is Search Engine Land's News Editor and owns RustyBrick, a NY based web consulting firm. He also runs Search Engine Roundtable, a popular search blog on very advanced SEM topics. Barry's personal blog is named Cartoon Barry and he can be followed on Twitter here. For more background information on Barry, see his full bio over here.

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• http://www.cpcsearch.com Terry Whalen

I’d be more interested in what Hal has to say versus other agencies. You need an absolute TON of data to look at this – I don’t know of many agencies outside of maybe EF that have enough data. Part of the reason you need a ton of data for this is that you have to negate all the other reasons for changes in conversion rates, including ad rotation, changes on the landing page or to the funnel, conversion tracking changes, etc. With enough data from enough different accounts all the other variables can kind of cancel themselves out. But with smaller datasets, you’re likely to come to erroneous conclusions.

In addition, I think the only data that really matters is the data of the specific advertiser. It may be true that in aggregate, conversion rates don’t vary a whole lot by ad position. But for specific advertisers, or possibly for specific categories, this may not be true. The problem is that for specific advertisers, there usually isn’t enough data from the account to form any conclusions about conversion rate by ad position.

• Astru

Why is this so surprising? When people click on a search ad, why would they act differently on the advertiser’s site based on the initial ad placement? Either the site satisfies their need (and the visit results in a conversion) or not.

• mothner

Interesting, though somewhat not surprising in that one could argue that lower positioned ads would have actually a better conversion rate, because once the users has made it down to lower positioned ads, he either did not see what he wanted or may have clicked on higher ads and returned to the SERP, so when he finally does click on the lower ads he has exhausted other options and is more likely to convert for this ad.

Mike

• http://www.christophtrautmann.de Chris T.

Conversion Rate
Transactions
Bounce-Rate
etc.

- Chris

• http://www.periscopix.co.uk/ Periscopix

Alistair in our team did a bit of thinking about this after Google published this blog. He thinks that actually Google may have used *too much* data and ended up aggregating several distinct populations, effectively erasing the differences between them.

• http://www.summitwebconsultants.com SummitWebConsultants

I check the keyword position report for all of my ecommerce customers and have yet to see anything significant enough to warrant using position preference.

But I agree with Terry, every site is different and it’s something you should look at for yourself. I never assume my ad performance will mirror data that has been aggregated over different websites, industries, seasons ect. ect.

- Dan

• http://www.rimmkaufman.com George Michie

We reached this same conclusion years ago. Terry’s right, it takes a ton of data, and fancy stats to get to this conclusion.

Indeed, this is the reason we’ve advocated against position bidding since we started the business. See eg: http://www.rimmkaufman.com/rkgblog/2008/09/30/position-bidding/

What Hal didn’t mention, for obvious reasons, is that those “worst” positions are at the top of the page, and the bottom of the page is slightly better. Google doesn’t want folks chasing each other DOWN the page.

However, people shouldn’t avoid position 1 on these grounds. The differences between 1 and 10 are terrifically slight, and well within the statistical noise of any coherent bidding system.

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