Want That Top Ad Position On Google? The Rules Are About To Change

In the upcoming weeks, Google will be releasing an updated algorithm to determine the ads that are displayed in the top ad spot, above the organic search results.

The updated algorithm will continue to use the quality and cost-per-click (CPC) figure but will be slightly tweaked for that top ad position. Instead of using the actual CPC, Google will use the advertiser’s maximum CPC in the overall equation. In addition, Google will be applying a stricter threshold on the quality component for the top ad positions.

Nick Fox, Product Manager of Ad Quality at Google, told me that this will help produce better quality ads in the top ad position because they are adding that stricter threshold for those ads. Plus, this will give advertisers more control over obtaining a top ad spot.

Let’s take a step back and break this out in a bit more detail.

One of the most common questions I hear in discussion forums are how does one obtain the top Google ad position. So to clarify, the top ad position is highlighted in the image below.

Top Google AdWords Ad

Google uses a quality score plus CPC model to rank all their ads. In the past, to achieve a top slotted ad position, you would need to meet a certain overall threshold in both quality and CPC price. Google, as stated above, is changing that algorithm to be more sensitive of the quality component, while also adjusting the figure used to determine your CPC. Now, Google uses the “actual” CPC, but in the upcoming weeks Google will use the “maximum” CPC.

What is the difference between actual CPC and maximum CPC? Every advertiser has to set a maximum CPC for their keywords. But an advertiser won’t necessarily pay the maximum CPC price when their ad is clicked on. In fact, most of the time advertisers won’t pay that amount. Instead, they will pay an actual CPC, which is lower than their maximum CPC.

For example, say I have an ad with a maximum CPC of $0.50, but there are no competitors in my keyword ad space. In that case, I will probably pay an actual CPC of $0.05 and not the $0.50, since I’m not competing against anyone.

In the past, Google used the actual CPC in the ranking algorithm for the top ad position. In the future, Google will be using that maximum CPC. As you can see, this gives advertiser more control on achieving that top ad position. Back to our example above. This advertiser who has been noticing a $0.05 actual CPC, will now be credited for his maximum CPC of $0.50 and will thus have an easier chance at obtaining the top ad spot.

Can advertisers abuse this? Possibly, but with the stricter quality threshold, it will be less likely. It is important to note that Google said while the current algorithm weighs both quality and CPC somewhat equally, the new algorithm for the top ad position will weigh quality substantially more heavily then they have in the past [NOTE: Google has followed up now to say that quality is weighted more heavily now and in the new system, the combined threshold of quality and CPC will be higher. We're double-checking further on this]. Google is implementing this new algorithm change so that those top ads will have a higher quality, so I suspect their tests proved to yield a high quality outcome.

So who will be impacted by this change? Well, right off the bat, those who have top ad positions for their ads will see a lot more competition in those areas. However, Nick Fox told me that there will be a “relatively limited” number of advertisers impacted by this change.

Again, there is no specific date as to when this new algorithm change will go live. It is expected to happen within the next “few weeks.” Google is letting us know now so that we have time to prepare for the change.

In Summary:

Benefits

  • Better quality ads in the top ad position for searchers
  • More control for advertisers over their ads achieving the top ad position

Algorithm Modification

  • Moving from using “actual” CPC to “maximum” CPC
  • Placing a stricter threshold on quality of those ads

Postscript: I have further clarification from Google saying that in the current formula for ranking, they weigh both CPC and quality equally. They also added that for the current promotion formula, quality is rated more heavily, and that’s not changing.

Postscript 2: To clarify, you will not be billed the maximum CPC for those top ads. You will still be charged the “actual” CPC. Google sent me this additional information about this concern:

Your actual CPC will continue to be determined by the auction, but subject to a minimum price for top spots. The minimum price is based on the quality of your ad and is the minimum amount required for your ad to achieve top placement above Google search results. As always, the higher your ad’s quality, the less you will pay. And you will never be charged more than your maximum CPC bid.

Related Topics: Channel: SEM | Google: AdWords

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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.ecashmint.com ranges22

    Hi,

    It does look to be a good move from Google. But i am wondering if it will only work say on Closed keyword groups where the Client is able to enforce a Max CPC for those who are able to bid on their brand terms. I am just think how that will impact Generic keywords. I just keep thinking that somehow it will benefit more those people who are able to set a higher Max CPC as opposed to those who can actually have a better Landing Page Score.

    Very eager to see your comments.
    -R

  • http://www.internetmarketingadvice.net jackied

    Does forcing this higher threshold for the maximum bid also mean that advertisers in the top positions will pay more per click even if they have a good quality score? And even if the answer to that is no, isn’t it reasonable to assume that there will be a lot of instances where the maximum bid will be raised by poorer-quality advertisers which will drive the CPC up for the high quality ads as well? And what if no one wants to meet the new max. bid threshold for the top spots? Will they revert back to organic listings?

  • http://www.sayu.co.uk Sayu

    In google adwords the important thing is for advertisers to determine the optimal, most profitable position. The optimal position for an ad will depend on a number of factors, individual to each advertiser, including: how the position of an ad changes when the CPC changes, how the CTR changes when the position of an ad changes, the conversion rate and what the value of the conversion is to the advertiser. More info in this white paper: http://www.sayu.co.uk/bid-optimisation-white-paper.html. Now, and when the new algorithm comes into place, advertisers need to be careful that they are not bidding over the odds to appear in top positions.

  • FAS Adam B

    I wonder if the switch to max CPC takes into account Time of Day bidding. If it does not, then advertisers with bids over 100% max CPC would not be getting full credit for their real max CPC’s after the time of day multiplier. Any word on this angle?

  • Rehan

    “Google has followed up now to say that quality is weighted more heavily now and in the new system, the combined threshold of quality and CPC will be higher. We’re double-checking further on this”

    Any confirmation on this yet?

  • http://www.andyredfern.co.uk Andy Redfern

    One more step in the wrong direction for Google in my opinion.

    For months they have banged on about quality, quality, quality yet now we move to system were people pay more to be in the top position they already hold.

    I am sure myself and many other punters would like Google to look at quality issues on the content network rather than implementing something that is primarily a revenue generator.

  • Patrick Carter

    This is a very informative article : Comment posted by Patrick Carter from http://www.computergeek247.com

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