Google created what they call the Quality Score, or QS, as the measure of quality of an ad. The QS is made in large part of the CTR but also a few other components. Saying the quality of an ad is technically wrong. While we do talk about the quality of an ad, it is really the quality of the combination of the ad and keyword. The same keyword will have a different QS for each ad in that group. And that is what is used to rank your ads as well as determine what you pay.

The QS is shown to you at the keyword level. This makes sense because showing it at the ad level (which is what Yahoo does by the way) could be misleading. This would assume the overall quality of an ad without regard to whether one or more keywords are dragging down its quality. In Yahoo, you just don´t know which keyword or keywords are negatively affect the ad´s quality. So keep in mind that it is the quality of the keyword for each ad.

The question then is, which ad is used if you have more than one? And are paused or deleted ads used in the calculation?

What Google seem to be doing is average out the QS among all active ads. Therefore, if you have two active ads, one where the QS would be 8 and the other 7 for a keyword, the average would therefore be six. This is all done in the background of course, all you see is the average of the QS for that keyword.

Using paused or deleted ads would not make sense. This would tend to drag down the QS and you would have to depend solely on the CTR. This would defeat the purpose.

But what is Quality Score exactly?

The basic definition is a comparative number that tells you how well you are doing against others using the same keyword. There would be no point to not compare to someone else. Lots of people think that Google uses a CTR scale to assign your QS. In other words, they think if you get say a 2% click rate that Google gives you a QS of 7 and that once you hit 3% or whatever click rate they think, your QS goes up another point.

Nothing could be further from the truth.

Using such a scale would be ridiculous. Not all keywords in all industries follow a linear scale. That is, a 2% CTR could be very good for one industry, for whatever reason, while it could be very bad in another where the top rates could be 8, 10 or even 15%.

So what Google does is compare your CTR against not only current advertisers but historically as well. You are compared to what an advertiser did for the same keyword back in 2008 or even 2005.