In the past, paid search marketing was an environment in which advertisers placed bids based on the positioning that they wanted to achieve. Following the model that is typically credited to GoTo (which later became Overture, and most recently became Yahoo! Search Marketing) an ad’s position was based solely on what the advertiser was bidding. Actual costs per click that advertisers paid were $0.01 above what the advertiser in the position below was bidding.

As an increased number of advertisers entered the space, costs per click rose rapidly. As a result, the concern about the relevancy of listings, particularly the paid listing, came into frequent question. In fact, according to Marketing Sherpa’s Search Marketing Benchmark Survey – August 2005, and Search Marketing Metrics Survey – June 2004, average costs per click between 2004 and 2005 increased 24.8% on Google, and over 30% on Yahoo!. At these rates, advertisers indicated they were near their limit on what they are willing to pay for clicks on the search engines.

Recently, in an effort to build a more relevant experience for their users and to reward advertisers who are highly relevant to the keywords they are placing, the search engines decided to take action. Google was the first to roll out a quality score model for its sponsored listings. In addition, Yahoo! announced that as part of its new Panama platform, an advertiser’s position and cost per click will be based partially on a quality index.

What is a Quality Score or Quality Index?

According to Google,

“[A] Quality Score is the basis for measuring the quality and relevance of your ads and determining your minimum CPC bid for Google and the search network. This score is determined by your keyword’s click through rate (CTR) on Google, and the relevance of your ad text, keyword, and landing page.”

Yahoo defines its Quality Index as

“a measure of how relevant an ad is. It reflects an ad’s ability to meet the needs of users by taking into account various relevance factors and click through rates compared to its position on the search results page. It also takes into account all keywords in an ad group. Furthermore, it is determined by the ad’s expected performance, which is determined by various relevance factors considered by Yahoo’s ranking algorithms, as well as the ad’s historical performance.”

In essence, Quality Score or Index will work to determine positioning and cost per click based on factors in addition to bid rates. These include click through rates, landing page relevance, historical click through to position ratios, and additional factors that at this time are undisclosed.

The Benefits of the Quality Model

There are some benefits to this model for advertisers, particularly if they have ad messages that have typically generated strong click through rates.

• In theory, this will reward advertisers with higher click through rates by allowing them to appear within higher positions without having to pay premium costs per click.
• The model also has the potential for diminishing competition on some keywords by penalizing non-relevant advertisers. This takes place in one of two ways: 1) disabling their ads, or 2) forcing them to pay high costs per click for the exposure.
• Competitive company name keywords, which can be placed through Google with certain stipulations, fall under this category. Quality score is likely to diminish this practice by assigning low quality scores to those advertisers who bid on their competitor trademark names based on lack of relevance.
• For advertisers who tend to place their bids based on a specific cost per action or transaction, this model also has the potential to provide stronger positioning within the search results if all other factors of the campaign are managed properly (e.g. creative drives strong click rates, landing page contains high degree of relevant content, historical campaign performance is strong, etc.)

Overall, in theory, this model should serve to diminish the rate of increasing costs per click.

Potential Downsides of the Quality Model

There are, however, some aspects to the Quality Score/Index model that could prove to be detrimental to certain campaigns, particularly those that are not managed closely.

One poor aspect of the model is the fact that the idea of ad or landing page relevance is dictated by the search engine. Search engines are able to gather data regarding click through rates, which is used to determine an ad’s relevance. However, in some cases, ads with lower click through rates might end up driving strong conversion rates on the backend; this is not a factor that search engines can take into account. Similarly, search engines can crawl a landing page for keyword references; however, conversions are not taken into account. For example, a lead form or a shopping cart area of a site typically does not reflect heavy content; however, these areas tend to drive the strongest conversions. Based on lack of content they may be penalized for being irrelevant.

To combat this, Google is allowing advertisers that have been granted a low quality score on an ad or keyword group to increase their bid to a suggested threshold (typically starting at a $5 CPC) to reactivate the advertising. Without an integrated campaign strategy that focuses on ad, landing page, and bid optimization, this practice can cause rapidly increasing bid prices on general keywords.

Additionally, based on the model, campaign management is becoming more and more complex. Search engines can disable ads based on low quality scores; however, this is not always readily apparent within the search engine interface. Therefore, it is becoming increasingly important to monitor campaigns frequently, and note trends with respect to impression delivery on ads and keywords in order to be able to identify when an ad or keyword group may have been affected.

As relevancy continues to become a larger factor in the management and success of paid search advertising, it will be increasingly important to employ agencies or dedicated personnel to search campaigns. These people have the knowledge and resources to dedicate to management of campaigns, and the ability to stay on top of developing trends within the industry.