• by Shankar Gupta , July 12, 2006

Google this week tweaked its keyword pricing formula in an apparent attempt to target arbitragers--affiliate marketers who buy ads on high-clickthrough rate search terms and link them to landing pages filled with ads but little to no content. The move also is seen as potentially affecting other advertisers, who might now see their minimum bids increase.

The change, which the company informed users about on its Inside AdWords blog, builds on an adjustment to the AdWords pricing algorithm implemented last December. With that earlier change, Google examined a site's landing page to determine its relevance to the keyword; the degree of relevance was then factored into a "quality score," which was used to calculate a marketer's minimum bid. The quality score system concept was first implemented in July 2005, and at that time was based only on historical keyword performance and the relevance of the creative's text.

Google did not disclose how its newest formula differs from the previous one, other than this vague statement on its blog: "From time to time, we improve our algorithms for evaluating landing page quality (often based on feedback from our end users), and next week we're launching another such improvement."

The move seems to be aimed at advertisers who provide little to no copy on their landing pages, instead offering only ads, said Peter Hershberg, managing partner at search engine marketing firm Reprise Media. "The first advertisers that Google is going to focus on are the pages that only feature AdSense or some other contextual advertising product," he predicted.

But, he added, other marketers could feel the impact of Google's move. "We've seen instances in the past where our ads had very high clickthrough rates and really strong copy on the landing page, and for whatever reason their quality score wasn't where it should've been. I suspect that advertisers will see some of that," he said.

The move also could cut down on the distribution of AdSense advertisers, however. Many arbitragers use AdSense ad units on their landing pages, and if those advertisers see their minimum bids rise, overall AdSense revenue could suffer.

Hershberg said, however, that though it might cause some small short-term losses for Google, there are long-term benefits for user experience, which helps ensure that users will continue to click on sponsored links.