Google Tweaks Minimum Bid Formula

Search giant Google next week will change its methods for calculating advertisers' quality scores, which the company uses to determine marketers' minimum bids as well as ad placement.

In a bid to give marketers more insight into its workings--which advertisers often criticize as too mysterious--Google will make available data on minimum bids of all keywords within ad groups, and will rate marketers' proposed keywords as "great," "ok" or "poor."

Google said the changes "will improve the overall quality of ads that we serve by lowering minimum bids for high quality ads and raising minimum bids for low quality ads," in a post on the Inside AdWords blog. "We expect that the higher minimum bids for low quality ads will reduce the number of low quality ads we show to our users."

Chris Copeland, CEO of Outrider, said that the marketers most likely to be hurt by the changes are the ones who purchase the most generic terms, because Google tends to consider such keywords low-quality. He added that while the move provides some additional transparency, more sophisticated advertisers could figure out their ads' quality scores prior to the update. "I don't think it adds too much information," he said.

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Google first introduced its quality score ranking in 2005. Yahoo earlier this month rolled out an equivalent feature as part of the new Panama platform.

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