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Changes to the Way Google Adwords Calculates Ad Rank (and What You Should Do About It)

Posted by drew on Nov. 3, 2013, 5 p.m.

A few weeks ago, Google announced that they would be changing the formula used to calculate Ad Rank in Adwords in order to deliver more useful ads to users. Previously, Google calculated Ad Rank--the ordering of sponsored ads on results pages--by using the chosen Maximum Cost Per Click bid and the quality score of the activated keyword. Quality score is calculated by Google using expected clickthrough rates and the relevance of the landing page. 

Adwords now takes into account ad extensions when calculating ad rank. Ad extensions typically increase the clickthrough rate of ads by providing more information and capabilities to the user. Google will now give ads with relevant extensions more weight in the ad rank formula. Here are some ad extension possibilities:

  • Call Extensions: Mostly used for mobile ads, call extensions allow a user to click a button and call your business directly. This extension helps you track calls and conversions that result from your paid search account. Each click-to-call interactions costs as much as a normal ad click would cost you.
  • Location Extensions: If a storefront is a very important part of your business, you should consider taking advantage of location extensions, which display your business's name, address and phone number along with a link that allows users to quickly get directions to you. 
  • Offer Extensions: Displaying a special offer in your ad will help draw potential customers to your site and encourage conversions.
  • Sitelink Extensions: This ad extension allows your users to choose their own landing page, giving them a more relevant experience. When they can find what they are looking for more quickly, their overall impression of your site is better.

While these are some of the more basic ad extensions, there are many more for different kinds of businesses (ones with frequently changing content, ones that participate in e-commerce, ones with a heavy social media presence, etc.)

Recommendations:

If you do not currently use ad extensions in your paid search account, you should definitely start updating your campaigns to include extensions. Doing so may result in lower costs, allowing you to target more areas or run ads more frequently. 

If you are already using ad extensions, you should review them to ensure that they are fully optimized with the most useful information and targeted to the most relevant audience--such as users on mobile devices or people in a particular area.