Google’s Economist Explains The Auction

Published on March 12th, 2009 by Jeremy Chatfield

Clear description of the importance of managing AdWords Quality Score and the effect on the auction and placement from Google Chief Economist, Hal Varian. I had a chat with a couple of Google’s AdWords Ad Quality Tech Specialists last week, and the description of Quality Score in the 10 minute video massively simplifies what is happening. This is far and away the most easily understood description I’ve seen from Google about the auction and rank, though.

I occasionally see PPC experts stating that QS isn’t as important as some other factor that they are promoting. This video makes it clear that QS has to be a central component of managing Return On Investment, and can even significantly affect the costs of an Awareness program - in which ROI is less important. The importance of the account’s accumulated Quality Score and long term response by users - longer term than CTR - can have huge impacts on paid price, which in turn benefits ROI. QS isn’t *only* CTR or *only* Landing Page factors.

Although this doesn’t explicitly describe the Content Network - AdSense placements - I’m pretty sure that there are differences. SmartPricing is not covered. In my experience whatever it is that SmartPricing does, can be counterintuitive to advertisers, sometimes with much more paid per click to high volume non-converting sources than to low volume repeat converting sources - I’d rather see a higher CPC to a site that sends my clients repeat converting traffic. Following Hal Varian’s suggestion at the end of the video, I’ll be asking for a clearer explanation of Content Network Pricing, especially with the new behavioural targeting system that has entered Beta.