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Ad Rank Formula and CTR

SCL
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# 1
SCL
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Hi,

 

As per Adwords guidelines; Ad Rank = Max Bid x QS with minor influence from ad extensions

 

Does anyone know why the engineers/tech team at Google do not use CTR directly in the ad rank formula, such as Ad Rank = Max Bid x CTR, or even Ad Rank = Max Bid x QS x CTR

 

The one performance metric that advertisers determin how well there ads are performing is the CTR they acheive.

 

Instead the adwords platform uses CTR to calculate a small part of the QS issued. So even though CTR does effect ad rank it isnt used directly in the formula.

 

Are there any reasons why the main performance statistic (CTR) isnt used directly as the main score to calculate Ad Rank, and do any of the top contributers know if this will be included in the ad rank score directly? (it just seems strange that such an important calculation isnt directly used)

 

Thanks

 

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Accepted by Theresa_Zook (Top Contributor Alumni)
September 2015

Re: Ad Rank Formula and CTR

Top Contributor
# 2
Top Contributor
Hi SCL,

The formula which you have mention,

Ad Rank = Max Bid x CTR
is used before year 2005, the time when there was no quality score.

http://www.ppchero.com/guides/history-of-adwords-quality-score-and-periodic-changes/

As we know that quality is directly proportional to CTR and Ad rank is directly proportional to QS.

so indirectly, CTR impacts on your Ad Rank. Also QS is not only cacluated on the basis of CTR, it depends on the many factors.
https://support.google.com/adwords/answer/2454010?hl=en

But if Ad Rank:- max cpc x CTR
So the advertisers who appears on top spot, will always appear in top spot. because they would get the higher CTR. And also some other factors like Landing experience and relevancy would not impact the Ad Rank.

Thus to improve the Ad rank, improve the QS as well as add the ad extensions.



--Rakesh Kumar, AdWords Top Contributor , Twitter | Linkedin | Community Profile
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Re: Ad Rank Formula and CTR

Top Contributor
# 3
Top Contributor
However, keep in mind that the major factor / parameter that affects the QS is still the CTR;
If you have high CTR - you should see a high QS
Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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Re: Ad Rank Formula and CTR

SCL
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# 4
SCL
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Hi Rakesh / MosheTLV,

Firstly thank you for your reply, I was hoping to get a detailed response which i did so thank you.

You mentioned if Ad Rank= Max cpc x CTR ‘’Advertisers who appears on top spot, will always appear in top spot. because they would get the higher CTR. And also some other factors like Landing experience and relevancy would not impact the Ad Rank’’

If the above calculation was in place (Ad Rank:- Max cpc x CTR) the advertisers who appear on the top spots wouldn’t always appear in the top positions as if another advertiser(s) increased their Max cpc to a similar level they too would gain a better CTR. It would then be the advertiser who had the most relevant/appealing text ad copy or extension(s) who would get the most clicks, resulting in a better CTR making it more even market for every advertiser.

The explanation given of the formula: Ad Rank:- Max cpc x CTR isn’t really valid as the current formula of Ad Rank= Max cpc x QS is flawed in the same way as ‘’advertisers who appears on top spot, will always appear in top spot because they would get the higher CTR’’ which means the advertisers in the top positions will always have a higher QS than the rest of the market.

In addition the current formula of Ad Rank:- Max cpc x QS is majorly flawed. For example; As we know the internal Adwords system issues a QS mainly based on an advertisers CTR. However the CTR to QS brackets seem to be quite generalised in that an advertiser with a CTR of 9% would be issued a QS of 8/10 and an advertiser with a CTR of 5% would also be issued with a QS of 8/10.

Based on the current Ad Rank formula both advertisers would have the same Ad Rank, it’s would come down to the advertiser with the highest Max cpc who would gain the highest position, even though advertiser A has a much higher CTR!

I do understand that Adwords looks more at factors like Landing experience and relevancy, however in my opinion CTR needs to have a direct impact in the ad rank formula. It could still effect QS in the same way as it does now but maybe the formula should be adapted to something like;

Ad Rank = Max cpc x QS x CTR.

This would mean there is a clear seperation between advertisers which a higher CTR.

Re: Ad Rank Formula and CTR

Top Contributor
# 5
Top Contributor

Quote:

SCL wrote:
Hi Rakesh / MosheTLV,

In addition the current formula of Ad Rank:- Max cpc x QS is majorly flawed. For example; As we know the internal Adwords system issues a QS mainly based on an advertisers CTR. However the CTR to QS brackets seem to be quite generalised in that an advertiser with a CTR of 9% would be issued a QS of 8/10 and an advertiser with a CTR of 5% would also be issued with a QS of 8/10.

 

@SCL  -I disagree:

 QS is relative to other advertisers. And since Google does not reveal the exact algorithm (for QS calculation),  but just a "generalized idea" - any speculation we make is unsupported. We can go "on and on" with assumptions / speculations..... Each of them could be correct or wrong... No one knows....

 

The bottom line is:  this is the formula which Google has   figured and this the"rule of the game". Another  PPC system might calculate QS differently. However; This is how it works in Adwords.

-Moshe

 

Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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Re: Ad Rank Formula and CTR

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# 6
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The formula for Ad Rank is Max CPC x Quality score (+possible ad extensions)

Quality score in search is based on CTR. On display it is based of your landing page quality.

Quality score main factors are CTR, the relevance of your keywords, and your landing page quality. There are other factors to calculate it, but that should be enough.