Call 1-888-683-1144 for PPC Management Services

Catch More Flies in Your Web

How Bids and QS Affect Rankings and Costs

Any change in the Adwords system affects not only you but other advertisers as well. If you increase or decrease your bids, you affect your ranking. It also has an effect on other advertisers. If your QS changes, it will affect your ranking and cost too as well as effect on your competitors.

Let´s look at five advertisers and the current state for each. I show the QS with one decimal point to clarify things. Also note that the price is rounded to the nearest cent:

The last advertiser pays his bid since there is none below him. He therefore pays the full amount. There may be some special rule for him but let´s assume for the moment that is the formula for the last one in line.

Note that you could create a similar chart in a spreadsheet and change numbers around and see what happens. Remember the formula used to calculate prices.

Suppose that I´m the fourth advertiser A4. I want to try to get a higher position. Since I´m bidding only $0.25 and paying $0.19, I figure that if I increase my bid to $0.30, I should get a higher position. Logically you also think that I should pay five more cents. Here´s what happens:

I have gone up one position, probably not what I had in mind for a five cent increase in my bid. This means my new competitor below me is A3. Since his QS is higher as well as his bid compared to A5, my price now becomes $0.26, a seven cent increase, not the five I expected. Furthermore, I have affected A3 and he now pays six cents less although he has lost a position. Not only that, I am now A2´s new competitor and his price is affected too and is paying four more cents (I´m sure he´ll be pleased). By simply increasing my bid, I have affected two other advertisers. Had my bid increase been larger to move another spot in ranking, I would affect even more of my competitors, some positively, some negatively.

Now, let´s suppose that instead of increasing my bid, I increase my QS by creating a better ad. Let´s say my QS goes from 7.0 to 7.5:

Again, I affect two other competitors. But this time, my price stays the same!  I have been able to get an extra position in ranking with the same bid without any penalty to my actual costs. I did not have to increase my bid.

A3 is still affected, positively with a lower cost (he´s now competing against A5 again so his costs remain the same as when I increased my bid). But he lost a position, which he may not want.

A2 is again in this scenario but this time instead of paying four more cents when I increased my bid, he pays only one more cent. In the first case, his increase in cost signal that a lower competitor has increased their bid. In the second, that someone has increased their quality so he better watch out. If he intends to maintain his second-place position, he will need to increase his quality or his bid.

It is in everybody´s best interest to increase quality and not bids. Of course, the mentality is to increase bids. I´ve seen advertisers use the same ad year after year and not trying new ones. Their QS stagnate and their management consists of changing bids all the time.

Be a smarter advertiser. Look to increase your quality. By the way, a similar system is used by all major PPC search engines so this applies not only in Google but in Yahoo and Bing as well.

Pay per click management services relieve you of that burden so you can concentrate on your business. Affordable prices. Call us to see what we can do for you.