The Importance of Being Relevant

Let’s face it, in terms of search and CPC/PPC we live in a Google dominated universe.

According to the most recent statistics (November 2010) Google holds close to 75% of the search market and 80% of the PPC market. This pretty much puts to shame the combined Yahoo and MSN/Bing market share which is just under 10% and 20% respectively.

So although it is probably worth the effort to put some of your proverbial eggs in the MSN/Bing basket – if you only have the resources to do one, Google has to be that one.

Powering Your Adwords Campaign to New Heights with Relevancy!

We’ve spent a fair amount of time in previous posts going on about the importance of quality score and relevancy. I thought that it might be wise to provide a bit more in the way of in-depth information on this subject because if knowledge is power, then this is knowledge that can help power your Adwords campaigns to new heights.

From the Google standpoint a successful ad auction must address the needs of three different parties. These parties are the advertiser (you!), the potential customer (the user) and Google (Google!).

From the standpoint of the advertiser you want to – or should want to – show relevant ads. You want to show relevant ads because relevant ads will attract the eyes and the clicks of the user. Numerous studies have shown that users like relevance. If they are searching for the latest in big plasma screen TV technology they want to see an ad that says something about big plasma screen TV technology. From the standpoint of the users, relevant ads are exactly what they are looking for.

What Google Needs

Google’s need is for the experience to be a positive one for both the advertiser and the user. Obviously if users click on an ad and go to the advertiser’s website and make a purchase, the advertiser is happy and may increase the amount of money they spend on their Google marketing campaigns. The user is happy because they found what they are looking for and will continue to use Google and keep Google as the dominate search engine.

Therefore from the Google standpoint, the more relevant the ad the better the user experience which in turn leads to a better advertiser experience. Everybody win. Everybody happy.

Another big bonus of creating relevant ads from the advertiser standpoint is that Google will reward you by showing your ad more often and by charging you less per click.

That’s what I said…charging you less per click.

Here is how that happens and what relevancy has to do with it.

How Relevancy Lowers Your Adword Campaign Costs

Every time a user searches for something on Google an auction is run. Let’s say there are four advertisers all running campaigns for big plasma screen TV technology. Let’s say that the advertiser with the deepest pockets has a max bid of $4.00 a click. The next advertiser is bidding at $3.00 a click, the next $2.00 and the last $1.00.

You might be interested to know that the top bidder is probably not paying $4 per click. They are probably paying the bid of the advertiser below them which is $3. So the second advertiser is bidding $3 but is only paying $2 and so on and so forth.

Sound simple enough right? Wrong. Because that is only the very uppermost tip of the Google ad auction algorithm iceberg. A much more important component is ad quality and ad quality is all about relevance.

Actually, again from the Google standpoint, there are three components to quality score. The largest of these is the click through rate or CTR. The click through rate is obtained by dividing the number of users who clicked on an ad by the number of times the ad was delivered, a metric more commonly known as impressions. Think of a click as a vote. The user who clicks on your ad is telling Google that they found your particular ad to be worth their effort.

The second piece of the quality score pie is a combination of the relevancy of the keyword to your ad and the user’s search query. So if a user searches on the keyword phrase Sony NSX-46GT1 and that phrase is in your keyword inventory and that keyword appears in your ad – that equals a high degree of relevancy. Because your keyword and ad are highly relevant to the user, the chance that the user will click on your ad is a good bet.

The User Experience: Land Page Quality Score

It is the third component where many an Adword campaign falls short and that is the quality of the landing page. I am sure we have all had experiences where we are looking for a particular something. We enter our search query and up pops an ad that promises to fulfill our needs. We click on the ad and…what the heck is this? We find ourselves on a landing page that has little or nothing to do with what we were searching for or has very little information. Regardless of what or why, the experience is not a good one.

I cannot speak for you but as far as I am concerned, in just about every case, I will never return to that website again. I’m sure I am not alone in that reaction to a poor landing page experience. As this is part of Google’s quality score algorithm it is I think another safe bet that Google feels the same.

In the words of Google – “a landing page should have relevant, original content…”

Google’s Ad Rank Formula

Now that we have an understanding of what goes into the quality score formula, here is how it affects the bid auction itself. Google takes your max bid times your quality score and comes up with what it calls Ad Rank. For an example let’s go back to our plasma TV advertisers.

Even though advertiser #1 has a max bid of $4 their ads pretty much suck (yes that is a technical term) and so their quality score is 1. In terms of quality score a ranking of 1-4 is poor, 5-7 is OK and 8-10 is great. Now let’s say that advertiser #2 has a quality score of 3, advertiser #3 has a quality score of 6 and advertiser #4 a quality score of 8.

Google determines an advertiser’s ad rank by multiplying the advertiser’s max bid times their quality score. If you do the math you will find that although advertiser #3 is bidding less than advertisers #1 and #2, advertiser #3’s ad rank is three points higher than advertiser #2 and a whopping 8 points higher than that of advertiser #1. So the best performing ad belongs to advertiser #3. In simple terms what that means is that advertiser #3 despite a lower max bid, has grabbed the top ad display spot due to relevancy.

And keep in mind that advertiser #3 is not paying their max bid of $2. They are most likely paying quite a bit less. And yes Google does have another formula to determine what that is. The price advertiser #3 has to pay is determined by the ad rank of advertiser #4 divided by the quality score of advertiser #3. Again, do the math.

The Importance of Being Relevant

The above has of course been simplified to prevent the glazing over of eyeballs. But what it should tell you is that when it comes to raising your quality score, increasing your impressions and click through rate, and lowering your bid costs, relevancy is what it is all about.

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