August 15, 2007 | Wednesday
Tweaking Google
By Jackie Danicki - Blogger in PPC |Search Engines |Ask |Google |Yahoo |Microsoft |Search Research |Search Technology
Google announced, earlier this month, that it was changing the formula for calculating when paid search ads could be moved from the righthand blue sidebar to the top blue bar on the results page. Now it is emerging that this tweak will provide better financial results for Google, “without sacrificing search quality or user experience”. How much better? Predictions are that Google’s gross revenue could climb 2-4% on the back of these changes alone. Hold on to your hats for a rather acronym-laden explanation…
JMP Securities analyst Bill Morrison writes:
Google only promotes ads from the east to the north position when ads meet both a minimum quality score (CTR estimate) AND a minimum effective CPM (eCPM) threshold, which is calculated as follows: CTR * CPC * 1000. Previously, when checking whether an ad’s eCPM exceeded the threshold for north promotion, Google used the advertiser’s actual CPC paid, which is typically $0.01 above the next highest bid in the auction, in the CPM calculation. The actual CPC paid is often well below the max CPC bid by an advertiser. Under the new system, Google will change its eCPM calculation by using a CPC that is equal to, or less than, the advertiser’s max bid CPC. This change will result in increases to advertisers’ actual CPC paid when a CPC that is equal to or less than the advertiser’s max bid CPC generates an eCPM that exceeds the threshold eCPM required for north promotion. In addition to the CPC increase, there will be a CTR increase associated with this ranking change that should have an even greater monetization impact. Our research suggests that ads in the north position can generate 2x the CTR of ads in the east position.
As for whether this will have an effect on the user experience, that is something Google probably does not want to ignore. New research (via Valleywag) indicates that Google’s rivals are getting better marks in customer satisfaction, with Yahoo going up 3.9 points to best Google, whose rating fell 3.7 points. According to the same figures, Ask.com is now even with MSN, having seen an increase of 5.6 points.
Customer satisfaction in search may not be as closely tied to market share as it is in other industries, such as automotive, because ingrained daily (or, let’s be honest, hourly) habits count for so much here. But Google may want to listen closely to the research and analysis which suggests that its once refreshingly simple interface is now inadequate and stale.
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