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One Month Later: Google's Update to Ad Rank Algorithm

It has been a month since Google made changes to their Ad Rank algorithm, so you might be wondering how the update has impacted advertisers? Let’s take a look at the observed performance impact on iProspect’s clients.

For a quick recap, Ad Rank is the value that Google uses to determine ad position for each advertiser in a given auction. The new algorithm has placed a heavier weight on the keyword bid, which effectively reduces the importance of other ranking factors such as Quality Score. When relevancy no longer carries as much weight, you will typically see increased competition and, ultimately, higher CPCs.

When Google first started slowly rolling out these changes on May 1st, iProspect anticipated two major differences in our keyword performance: increased CPC and loss of impression share (IS), particularly for core, trademarked search queries. It took a full month until the new algorithm was implemented across all accounts, and – after looking at the results from iProspect’s clients – we can confirm that our predictions were correct. We have compiled data from our entire client base, analyzing keyword performance for terms in position 1 - 4. We broke out the data by trademarked vs. non-trademarked terms, device and match type to see the overall effects on CPC and Impressions Share.

When you glance at the overall performance a week prior to May 1st and a week after May 31st, you won’t see anything alarming. CPC did rise, and IS slightly followed across the board.

However, when you drill further, you can see that this Ad Rank change did indeed meet our expectations, specifically for trademarked queries on desktop.

Let’s look at CPC.

Again, our overall CPC showed only a slight increase, but the data gets interesting when you break it out by trademark vs. non-trademark terms. iProspect clients saw an 8% increase in CPC on our trademarked terms, but saw a 4% decrease on non-trademarked. Why would that be? Think about all of the factors that play in to non-trademarked query performance; quality score is typically not a key factor. It appears that taking away the weight on that specific KPI has delivered a slight cost benefit to the non-trademarked keywords. On the other hand, Quality Score has traditionally played a major role in keeping trademark CPC low. With this recent Ad Rank change, we’ve seen an 8% impact.

Let’s also look at device type.

So, CPC increased in trademark overall, but what role did device type play in these increases? Looking at the chart below, it’s safe to say that advertisers were hit the hardest on desktop. Impression share remained relatively flat overall, but desktop CPC spiked a whopping 30%! Although mobile traffic is growing across most advertisers, desktop still drives 50% of traffic for most clients. Desktop is also where CPC tends to be higher because competition is often more fierce, so it’s not surprising to see this spike. However, if this trend continues,  we expect we’ll see more advertisers switching their focus to mobile in order to convert more cost-effectively on those lower CPCs for their trademarked terms. This of course is contingent on whether mobile ROI can improve on this device.

If CPCs are up on trademark terms, what has impression share been doing?

You would think, based on the large increases in CPC for trademark keywords, we would see improvements in IS. However, that was not the case. Though high-quality score previously earned you a higher Ad Rank, that is no longer the case with these terms!

And, if you want to take it even one step further, we can look at trademark, exact match terms on desktop. Exact match typically has higher relevance, which is why you should be paying less per click on your trademarked terms. Where you see the highest CPC increases is on keywords that have relatively high Max CPC settings compared to the keyword’s average CPC. iProspect’s exact match, trademarked terms on desktop saw impression share remain almost flat while CPC increased 35%. This is huge, considering this is where most accounts have their lowest CPC and most efficient ROI.

Conclusion and Next Steps:

Overall, iProspect’s predictions were correct. These changes have had a definite impact on our accounts and have created a new reality that advertisers cannot avoid. That said, we recommend you do the following to avoid any unnecessary inflation in your trademark terms:

  • Continue to monitor trademark term bids. Make the proper adjustments needed within your account to lower your keyword bids, without losing a large amount of impression share. This may take some tweaking to find the sweet spot.
  • Push more in mobile. If you are seeing these types of increases on your desktop keywords, consider pushing more on your mobile campaigns. While ROI performance may have been an inhibiting factor to investment in mobile, the increased desktop CPC may override that factor.
  • Make sure your accounts utilize all available ad extensions. This will help improve CTR and decrease CPC.
  • Monitor auction insights for competitor conquesting. These results may change now that there is more emphasis on the bid, making it easier for competitors to come in to your space.