Click Thru Rate

The adword advertisers are paying a fee to appear along with the search results based on the amount that they bid for their placement. For now I want you to think in terms of the ad with a higher bid amount will rank above those with a lower bid amount.
 

For demonstration purposes, let's say that the AudiobooksUSA.com advertiser to the right, has bid 75 cents on the keywords of "self help audio books". Let's also say that the advertiser SelfHelpRUS.com has bid 50 cents on the same keywords. As a result of the bidding, AudioBooksUSA is shown above the SelfHelpRUS folks. Test results indicate that an ad in one of the top 4 positions will produce a higher click thru rate (CTR) and therefore are more desirable. To calculate the CTR you simply divide the number of times the ad received a click by the number of times the ad was displayed.  If an ad was displayed 100 times and it received 10 click thrus, then it has a CTR of 10.00%. 10/100 = .10 The CTR is an important factor to consider for a few reasons. Firstly, it is a valuable way to measure the effectiveness of your ad. A well written ad will produce a CTR of about 5% and higher.

Quality Score

In reality it is much more than the keyword bid amount that determines the positioning of the adwords. Google calculates what they call a Quality Score for each ad. I am not sure that anybody outside of Google actually knows how this quality score is calculated. Google does not give us the actual formula and I think that is mostly because the method of calculating the quality score is somewhat subjective. They do however provide us with a general explanation of the method of calculation.

One element of this calculation is the advertisers bid price. But another element of this score is the CTR. Here is an example.

Advertiser "A" bids 50 cents per click for their ad and it receives a CTR of 10%. This result is a revenue of $5.00 for every 100 times Google displays this ad.

Advertiser "B" bids 75 cents per click but only has a CTR of 3%. So for every 100 times that Google displays this ad they generate $2.25.

Using these examples it is easy to see why Google would want to rank advertiser "A" higher then "B", even though "B" has bid .75 and "A" has only bid .50. Advertiser "A" would be generating more income for Big G and make no mistake about it...money talks.

But it's not really that easy. The remaining element of the quality score that Google discloses to us is the degree of relevancy.

Relevancy

In order to secure a top position ad placement your adword will also need to be relevant to the page the ad is linked to. This page is often referred to as the "landing page". Here is an example.

Let's again use the scenario of an audio book seller. The seller is putting up an adword to sell an audio book on how to quit smoking. He selects the keywords "how to quit smoking" to associate with that ad.. So his ad is triggered when a user of the Google search types in those keywords. If it is a well written ad, the searcher clicks on the link in his ad to see what he has to offer.

That search user is then routed to his landing page. his landing page is the main page of his website which sells hundreds of different audio books. The page is nothing more than his company logo and a couple hundred links to the various audio books he sells. The link to the quit smoking audio book is on that page with all the others.

Google would not consider this landing page to be very relevant to the search that was performed. The quit smoking link is there, but it is among many other items. Google's goal is to make the search quick, easy and relevant. By setting up your ad this way you have interrupted that flow.

The audio book advertiser would have received a higher quality score if they would have had their ad linking to a page dedicated to only the quit smoking product. When the searcher clicked the link in the ad, the next page would have shown a page with information only about how to quit smoking. The searcher wouldn't have had to look for the quit smoking link on the vendors huge main page and this would have created a more pleasant experience for the searcher.

With this being said, the how to quit smoking page doesn't have to only contain information on how to quit smoking, but the main subject of that page should be information on how to quit, or buy the product that shows them how to quit etc. The advertiser could have placed a link back to their main page on the quit smoking page, so that the searcher could also find information on other products and/or topics. However, the landing page from the ad click needs to be highly relevant if you want top ad placement on the Google search results page.