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Monday, August 13, 2007

Google AdWords Algorithm Update

Posted by @ 9:44 pm

Do you run an AdWords campaign and want to see your business in that top ad position? Now it may be within your reach. In the upcoming weeks, Google will be tweaking their AdWords ranking algorithm which is used to determine which ads are displayed in the top spot, above organic search results.

The updated algorithm will continue to use the Google quality score and cost per click (CPC) elements in the formula, with a small change for the first ad position. Instead of using the advertisers actual cost per click, it will factor in the maximum CPC bid for each advertiser. This will allow advertisers to have more control over their ads showing in the top position.

From the Google AdWords blog:

“Actual CPC is determined, in part, by the bidding behavior of the advertisers below you. This means that your ad’s chance of being promoted to a top spot could be constrained by a factor you cannot influence. By considering your ad’s maximum CPC, a value you set, you will have more control over achieving top ad placement.”

Let’s look at a quick example. Say I have an ad with a maximum CPC of $0.25, but there are no competitors for my keywords; then I’m only paying the default cost of $0.05 per click. If any new advertisers enter the market for this keyword, I will be credited for my maximum CPC bid of $0.25, giving me greater control over retaining that top spot.

Some bloggers have raised concerns over the new formula, saying it will allow the system to be abused by advertisers willing to pay more and is just a move to increase Google profits. It should be noted that Google still use quality score as the greatest determining factor in top ad placement, making it unlikely for junk advertisers to buy their way to the top. But as far as increasing Google’s profits go – it’s likely that some advertisers will see an increase in the price of their keywords. As always, let us know what you think via our blog comments!

Matthew Elshaw Matt is a marketing professional at, an international search marketing firm. Matt's passion for online marketing began at university and has proved invaluable in steering product development and marketing initiatives at the company. Matt is a regular contributor to the ineedhits search marketing blog.

View Matthew Elshaw's profile

Discussion (3 - comments)

So, AdWords ads are a 5-cent-CPC no matter what, and bidding for top ads is just thinking of a bigger number?

That would make all the “GOOGLE ADS FOR FREE”-links I’ve been seeing (but not touching) make sense … if you THINK an ad-click’s worth 10 cents, and you get it for 5, then it’s LIKE “free.”

By MythMan J - August 14, 2007

I don’t think the default CPC is 0.05$ because I came to know that many clicks simply yield a measly 0.01$ in the adsense earning.

By Anonymous - August 15, 2007

The cost-per-click (CPC) of AdWords listings depends on the competition for your chosen keyword(s). If you’re bidding on popular keywords, your likley to be paying a lot more than $0.05. In my example, the advertiser would only be paying around $0.05 as there was no competition for his keywords.

By Matthew Elshaw - August 15, 2007

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