More on Google Adwords Algorithm Change

Judging by the mail I am getting I will attempt to explain the entire Google Adwords Algorithm change many of you may be noticing.

Some time between June 14th & June 27th I started to notice distinct changes in many Adwords accounts. Keyword buckets that were inherently stable concerning their respective spend and CTR were now performing at entirely different levels in each category. As a whole, differerent Adwords accounts have seen either a very noticible increase or decrease in CTR and Ad Spend.

The second fact that I noticed is that ads were not appearing in the position they were supposed to be in. Sometimes they were in higher spots, sometimes lower. I have noticed ads drop from 3rd position to 31st position, and from 8th position to 1st position without any change to bids or ad content.

Today I called Google and spoke to an account rep. I mentioned the strange statistics and rankings I was tracking and asked for clarification as to what they have done to Adwords algorithm. After much wrangling I finally got the answer I was after.

The answer is that Google has instituted a local search parameter into Adwords. Different regions of the country will see Google Adwords ads in different positions. So while you may be bidding for 3rd position for the term "widget", its placement in each region will be based on its historical performance in that region.

So let's say you sell surfboards. Historically you have bid for 3rd position for the term "surfboard" and you have an average position of 3.4 (as we all know ranking fluctuate depending on CTR and BID so it is rare your average position is exactly the bid position you try to attain). Now let's assume that historically you have a 8.0% click through rate in the "California" region (Google hasn't released the boundries or number of different regions), but only a 2% click through rate in the "Iowa" region. Google's new Adwords algorithm may place your "surfboard" ad #1 in California region searches , but #10 in Iowa region searches.

This wouldn't be so bad, but since we do not know the regions, the only way to know how your Adwords ads are being placed is to gather sample search results from across many regions. This is going to be tremendously difficult for a small business that has no regional or national staff or offices.

Google believes that this new parameter will result in better search results for the end user. However this comes at a steep price for the control of a Google Adwords account has been made exponentially more difficult. I fail to see why Google did this to the PPC engine. If this was applied to natural search rankings it wouldn't be nearly as bad. But Google has decided to bite the hand that feeds it, taking away control from the businesses that pay to use the Adwords service. Businesses are now at the mercy of where Google believes their products will sell best, instead of where the business believes it will sell best. If I was bidding for 3rd position and my sales didn't warrant the ROI, I have myself to blame. With this new change, most businesses will have Google to blame because businesses will not be able to control the placement of their ads.

This also bring to light many potential hazards:
1) The sparking of a bidding war to try to reclaim ranks.
2) Increased spend on terms that were known to be marginal and bid to low positions now appearing in high positions.
3) The loss of revenue from previously high ranked, high revenue terms that have now been dropped out of major markets.

Google claims that they believe that this will result in higher CTR and Conversions for most businesses. Of course higher CTR rates means higher ad spends for everyone, and this benefits one business more than any other...

I knew I should have bought more of that Google stock.