Top Position: Higher CTR, Higher MinCPC.

An article on Search Engine Land adds more information to the flimsy FAQ. So the top position is supposed to have a higher (unpublished and incomparable) CTR as a criterion, and a different (unpublished and incomparable) MinCPC as the qualification to appear.

The auction still seems to be built on the generalised second price model. But there’s already a fudge factor for Minimum Cost Per Click (MinCPC) for the right hand side auction, based on undisclosed criteria, in addition to some documented or inferred criteria.

Google appear to be saying that the top position now only permits advertisers where the CTR is above some qualifying level, and above some minimum price for the bid.

Erm. Just how is this different from *anything* that Google does, now?

Experiments With The Auction

An example?

Create an AdGroup for some random text string. If you all do this together and start searching for the same string, you’ll create some interesting but unintended effects. So please choose one of the following, only if your imagination fails you:

• snazzled fribbles
• omnicognisant limpoids
• hyperlobic snozzles

Or, even better, combine those words plus something distinctive of your own (such as a colour) and make your own new AdGroup. Use the keyword you’ve picked in the advert. Use exact match only. Bid $0.01. Look at the AdGroup. Chances are that you’ve got a Minimum CPC close to $0.05, and your advert is inactive as your bid isn’t high enough. Now increase the bid to the MinCPC, and try some searches on Google.com (or your local Google server). You probably don’t appear. Increase the bid and you should find that at around $0.22 you’ll see your advert appear. Drop the bid, without clicking on the advert, and you disappear from searches again.

This shows that there is already an unpublished criterion for whether an advert appears, even on the right hand side, even if you meet the MinCPC. The default CTR for an advert appears to be around 2.5%. So Google is implicitly saying that you need to offer (not *pay*, but *offer*) a CPM of around $5.50.

Now, this number is a key number for Google. We can find it again, quite easily.

Pause the newly created AdGroup, and create another AdGroup for your selected keyword, but this time, do not use your keyword in the advert. Bid $0.01 again. Now look at the offered MinCPC in order to activate your advert. If your advert shares no similarity to the keyword, you should see a MinCPC of around $5.50.

If you do click on your keyword-matching advert, you should see a fairly rapidly decreasing CPC. The first click will probably pay Google around $0.11, and the second around $0.05 and after three or four clicks, you’ll probably be at around $0.04. The CTR is not relevant - this can be done with ten impressions or a hundred impressions and I’ve got roughly the same results, in the tests that I’ve done.

Result!

A few experiments yield some important parameters for Google.

You need to initially offer a CPM of $5.50. This is coincidentally the matching MinCPC required when your advert fails to match the keyword - and for which we can then infer that Google assumes a CTR of 0.1%.

Minimum *offered* CPM to appear - $5.50

Assumed CTR for an advert and matching keyword with no history - 2.5%

Assumed CTR for an advert and non-matching keyword with no history - 0.1%

Way cool, eh? But what has this got to do with the Top Position box?

Top Position

Until now, Google has applied a few known criteria for appearing in the top position.

Your adverts must have passed editorial review.

Well, this makes sense. These adverts are going to be given a premium position, and will be the most likely adverts to run on Google’s partner sites. So they *must* be reviewed and approved, or they can’t be published widely.

They must be high CTR

I’ve never got a clients advert into the top positions with a CTR below 7.5%. The actual value seems to depend on the keyword. Different keywords appear to have different threshholds. I’ve had some adverts with a 35% CTR (if run in position 1) that don’t appear, when the bid is too low.

Hang on… say that again

Yup, right now, if you have an advert that, when run in position 1, would have a significant CTR, it gets dropped from the top position box when you drop the bid.

In what way is this different from what Google is now saying?

They now say that you need to exceed a minimum CPC in your offered price to appear - just as now.

They say that they will only choose from higher CTR adverts - that appears to be functionally true now.

The difference is… what? They’ve always been able to pick who they want. Advertisers don’t have information about how they are picked.

The difference is, I suspect, that they’ve set a new CPM target for the top position box. This changes the required MinCPC before your advert appears there, and your offered price affects the required CPM target for your advert to be allowed to participate.

That’s all that this announcement boils down to.

For the implications - my previous article is still close enough, I think. This move will raise revenues for Google, improve partner revenues and allows Google to compete with MSN, by offering publishers more money from the top placed adverts. That will position Google for further growth by stealing more partners from other advertising channels.

I suspect that Google hasn’t been focused on user experience, or what this change does for advertisers, agencies, affiliates, etc. All that stuff is secondary, and the story about improving user experience is just smoke and mirrors. Maintaining the share price and analyst confidence. That’s what this is about.

Updates

2007-08-16 - Title changed “Higher CTR, Higher MinCPC, Does What?” didn’t point to the article being about Top Position.