How Adwords works: Calculating quality score & Page rank
The three best shopping streets in the world are Fifth Avenue in New York, Bond Street in London, and Avenue Montaigne in Paris. You are probably wondering what this has got to do with learning how Google Adwords works, but there is a connection.
The best shopping streets in the world do not have liquor stores, 99-cent stores or fast-food outlets. If businesses like this opened on any of these streets they would quickly lose their reputation as being the best. This would happen even if the lower-end shops paid two or three times the rent of the luxury brands and designer boutiques.
With Adwords, Google is trying to create the Fifth Avenue of the search world, and the Bond Street of online advertising. How much you are willing to pay for the advertising space is important (obviously). But the quality of your offering is a much higher priority.
So here is how it works. You tell Adwords the keywords that you would like associated with your business. Google then matches those keywords with search queries. If there are more people bidding for that search query than Google thinks it can handle, it will start an auction.
Whether or not there is an auction depends on the industry you are in and if there’s any other competition for the keyword. Even if you have a small business website don’t be surprised if there is a lot of competition for the keywords and search queries relevant to your ads.
Now we are getting to the crunch of how Adwords works because although we use the term “auction” it is not like an auction in the offline world. In auctions for cars, antiques or property the winning bid is usually the highest bid. This is not the case with Adwords.
Google does look at how much you bid. But it also looks at how relevant your ad is to the user. And it looks at the landing page in an effort to judge how useful it will be to a person entering a specific search query. Google calls this its quality score and it plays a big role in determining the placement of ads.
This system is to protect the integrity and reputation of its results. And remember, if the user does not click on an ad then Google does not get paid. So it’s in Google’s interest to provide ads that are relevant instead of ads that might generate more money if only someone would click on them.
Time For Some Mathematics
The position of your ad in the results for a particular search is called your Ad Rank. It is calculated by multiplying your bid by your quality score.
Ad Rank = Bid x Quality Score
Simple mathematics will tell you that quality score is incredibly important. Here is an example. Ad “A” has a quality score of 10 while ad “B” is only half as good so only gets a quality score of five. Ad “B” will have to bid twice as much to get the same Ad Rank as ad “A”.
Of course you will need a budget in order to run an Adwords campaign. But the quality of your website, landing page, and ad script are much more important. The combination of these three key features make up quality content – which is more crucial to the success of your campaign than the amount of money you are willing to pay. So concentrate on quality content, and where you’re placing it. You may just wind up on Fifth Avenue.