New bidding system on Google Ads (AdWords)

Google recently announced a significant change to their Google Ads (AdWords) activity which will be introduced in August and revises the way that keywords are managed. The changes are supposedly to provide advertisers with more control over their campaigns and to provide users with more relevant results, although cynics might also say that it’s a way to increase the overall bid rates and spend by stealth!

The AdWords tool has always been a system that benefits more relevant or better performing adverts with high clickthrough rates, so that an advertiser can rank higher than a competitor – even with a lower bid cost – if the advert is attracting a better rate of visits. Combined with this, Google disables keywords that aren’t performing well, which is determined by a number of performance factors.

The new system that has been announced will help to simplify the management of keywords but will mean that there are more calculations that determine advert positions (the ‘Ad Rank’) going on in the background.
Essentially, Google Ads (AdWords) are introducing a new rating system for every keyword called a Quality Score. This is based on a range of factors including a keyword’s clickthrough rate, the relevance of an advert’s text, the historical keyword performance among all advertisers and for each individual advertiser, plus a number of other relevancy factors that Google will not reveal.

This Quality Score will be combined with the maximum cost per click level to determine each advertiser’s Ad Rank. However, it will also be used to calculate a minimum cost per click for each different keyword, which could be higher or lower than the current 4p minimum. This will be constantly updated, so the minimum bid for a certain keyword could change over time.

So what does this all mean for advertisers who are running a Google Ads (AdWords) campaign?

We can’t answer this with certainty yet as the impact will become more apparent over the next few months. However, it will mean that advertisers will probably need to make changes to their account and closely monitor the activity over the next few months as the system is introduced. The change is designed to reward highly relevant adverts, whilst placing a higher cost on speculative adverts which are not so relevant to a keyword – it will still be possible for advertisers to target these more general keywords, but the cost per click is likely to increase.

This change may affect your AdWords advertising if you tend to bid close to the current minimum bid rates on keywords, or if your advertising tends to have a low clickthrough rate. It will also be possible to target keywords which would have previously been disabled, which may be of use in some situations.
We’ll be keeping a close watch on the effects of these changes over the next few months and reporting on them to our PPC advertisers.

If you would like to know more or have any questions about these changes, please contact us.

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