• by Tameka Kee , August 28, 2008

Google has announced a trio of Quality Score changes aimed at making the way the scores are calculated more accurate and giving paid search advertisers a better read on how to improve them.

While some in the search community view the changes in a positive light, others are concerned that the tweaks are more focused on improving Google's bottom line. Financial analysts seem to agree, with UBS issuing a research brief about the changes under the headline: "Changes at Google may increase coverage and pricing, though magnitude unclear."

A keyword's Quality Score is determined by a number of factors, including the term's click-through rate (CTR), relevance and historical performance, among others. AdWords Quality Scores influence the amount an advertiser has to pay to run the ad, as well as its position, and one of the improvements stems from the way the score is communicated. Previously, advertisers would see a rating of "poor," "OK," or "great." However in the coming weeks, that will shift to a 10-point system, with one signaling an ad of the poorest quality, and 10 the highest quality.

According to Jonathan Ragals, COO of 360i, it's a welcome move toward transparency. "Before, you didn't have much visibility into the score itself," Ragals said. "You couldn't tell whether you were at the top or bottom end of the 'OK' or 'great' scale, and you couldn't really see how any changes you made would affect it. With this granular scale, you can make a change and move from 6 to 7, for example, and see that your efforts were successful. You can also better assess the greatest areas for improvement."

Others argue that the change is not as significant because the grading is still based on the same opaque algorithm. "We confirmed with Google that there's been no change to the previous algorithm," said Tim Daly, SVP of interactive services for Unreal Marketing. "They just changed the translation, so it doesn't give a real assessment. We don't use it as an indicator of an ad's true quality."

The second change is that the Quality Score will be assessed on a per-query basis, as opposed to being tied to the keyword indefinitely. "This way, AdWords will use the most accurate, specific, and up-to-date performance information when determining whether an ad should be displayed," the company said, on the Inside AdWords blog. "Your ads will be more likely to show when they're relevant and less likely to show when they're not." In addition, ads that were previously marked "inactive for search" because they didn't meet the blanket Quality Score requirements may actually be placed in rotation for relevant queries.

UBS analyst Benjamin Schacter thinks that the change will likely lead to increased coverage, or the overall volume of ads that show up for particular queries. "With quality scores now calculated on the fly, Google may be able to find scenarios in which these 'inactive' bids achieve a high enough score to be served against certain queries," he wrote in a research brief. "This change has the potential to move millions of words back into the competitive auction for placement."

Google Founder and President of Technology Sergey Brin addressed the issue of decreased coverage during the search giant's second-quarter earnings call, noting that the ads' quality team may have been "probably a little bit more aggressive in decreasing coverage than we ought to have been." Brin said that they company continuously tried to reduce coverage while increasing monetization, and saw fewer clicks (because there were fewer ads) as a result.

Lastly, keywords will no longer be tied to a minimum bid. Instead, advertisers will see the minimum amount they would need to have their ad appear on the first page of results. According to the Inside AdWords blog, this change was tied directly to advertiser feedback. "We learned that knowing your minimum bid wasn't always helpful in getting the ad placement you wanted," the company stated on the blog. "So we hope that first page bids will give you better guidance on how to achieve your advertising goals."

But it's this change that has some search marketers concerned about cost-per-click (CPC) inflation. "The likelihood is that these changes will produce more competition for first page listings, resulting in higher CPCs," according to Rob Weatherhead, who addressed the changes on his blog, Digital Media World. "By allowing people to see what it will cost them to appear on the first page, you are giving them the push to bid to that level. Some will shy away and save their spend, (but) to others it will be the carrot they need to make the next step."

Daly agreed: "I think it's going to be a significant price inflation point, as now you'll have to guess whether you've spent enough just to show up." He said that the new system might actually deter advertisers--particularly search newcomers, because such advertisers often launch campaigns with small bids that increase as they become more acquainted with the system. "And I'm not saying that that's the best strategy, but eliminating the conservative tools may negatively impact revenue and new advertiser growth," Daly said.

Schacter also felt that the shift could potentially drive higher average CPCs. "We believe that Google's decision to replace 'Minimum bids' with 'First page bids' should, over time, have an inflationary effect on average pricing for certain keywords," he wrote. "We believe that placement on page 1 search results is an important priority for keyword advertisers. By improving transparency in the process for determining which bids will yield page 1 placement, we expect many advertisers will adjust their minimum bids higher in order to compete for that placement."

Still, he did temper the optimism with a disclaimer. "While these changes are potentially meaningful monetization improvements, it is unclear how significant the changes will be (i.e., we can't quantify it yet)," he wrote. "Prior monetization improvements have had a material impact on revenue (although very difficult to quantify) and we believe that these most recent changes could as well."