Digital Insights

How Google’s Algorithm Affects PPC Advertising

Published: February 6, 2015

Practically every website owner or webmaster has at least a basic understanding of Google’s organic ranking algorithm. This is the mysterious mathematical formula that assigns rankings in the organic search results based on how well a website scores for each of the more than 200 rankings factors that Google feels are relevant to the search experience.

So what does this have to do with pay-per-click (PPC) advertising? Absolutely nothing. Google maintains a strict separation between organic and paid search, and no matter how well or how poorly your site is ranking organically, the organic search algorithm has no impact whatsoever on your PPC campaigns.

Instead, PPC advertising is governed by an entirely different kind of Google algorithm that plays a major role in determining how well your PPC campaigns will perform: the AdRank algorithm.

How Does Google’s AdRank Algorithm Work?
The AdRank algorithm is an important component of the Google AdWords advertising platform, and is used to determine how prominently your ads will be displayed in the search results as well as the cost-per-click (CPC) rate that your account will be charged.

The position of your PPC ad on the search results page is critically important because the closer to the top of the page that your ad appears, the better chance you have of attracting the attention of search users and generating more clicks to your landing page. One study that tracked more than 192 million ad impressions and 2 million clicks across a number of different verticals confirmed that the higher-positioned PPC ads had significantly greater click-through-rates (CTRs) than those ads displayed at the bottom of the paid listings.

AdRank is based on three elements:

  • Your maximum CPC bid.
  • Your Quality Score. This rating considers such factors as the relevance of your text ad, the quality of your landing page, how well your ads perform across different mobile devices, and the number of impressions and clicks that your company’s ads have generated in the past.
  • The anticipated influence of ad extensions and formats to be used in your campaign. The most frequently used extensions include location, call, and click-to-call extensions as well as sitelinks.

If the maximum CPC bids and Quality Scores for two ads are equal, the ad that Google believes will better serve the search user through the use of extensions will usually appear above the other ad in the results.

How Ad Quality Affects Your PPC Campaigns
Your ads must meet Google’s minimum standards for ad quality to be eligible to even participate in ad auctions. Higher quality ads typically receive lower CPCs than lower quality ads.

Ad position is largely determined by ad quality. Higher quality ads are usually displayed closer to the top of the page, which typically generates more clicks.

Ad extensions are proven tools for boosting your CTR as well as increasing your conversion rate, but they’re not available to every PPC advertiser. Your eligibility to use ad extensions depends on your ad quality score.

Improving the Quality of Your PPC Ads

  • Create a separate ad group for each of your products. This will help make your ads more relevant for searchers, and will usually improve your CTR.
  • Select keywords that relate to the theme of your ad group and corresponding landing page.
  • Include your keywords within the body of your text ad. This helps convince users that your ad is relevant to their search.
  • Include a strong call-to-action in your ad. This encourages more clicks, and gives searchers an idea of what to expect when they arrive at your landing page.
  • Test different ads to determine your best performers.