In PPC, Ad Rank is given a lot of power. It governs where your ad appears on Page 1, or even appears at all. In this post, I will attempt to dive deep into the latest ‘black box’ algorithm of Google’s Ad Rank – how it is calculated and what you can do to improve your Ad Rank.
The Science of Google’s Ad Rank
In chemistry, we learn that different atoms and molecules come together to form compounds. For example, when sodium (NA) atoms interact with chlorine atoms (Cl), sodium chloride (NaCl) is formed. We also find out that methane, with the chemical formula of CH4, is composed of one carbon atom linked to four hydrogen atoms.
If we treat Ad Rank calculation like a chemical compound, we will find that it is made up of many different factors that comprise it.
Ad Rank still remains a black box as of 2021. We are not striving to understand every little factor and signal that goes into the calculation during the ad auction. This is because a lot of these are beyond our knowledge. Google may be using as many as thousands or even millions of small factors that go into the Ad Rank calculation in real-time. What we as advertisers strive for is the high-level view of Ad Rank calculation. And these high-level views comprise of factors that affect the Ad Rank the most. What percentage of it, Google did not reveal. They said that understanding these high-level factors can help you achieve a higher Ad Rank and thus rank higher on the search results. And also, many of these additional untold factors may just be iterations of the main high-level factors.
For the sake of argument, let’s give these high-level factors a reasonable weightage of 90% into the Ad Rank calculation. Because if it is 9% or 49%, it wouldn’t be called a major factor in moving our Ad Rank. Hence our optimizations will be done in vain if the Google machines with their untold factors held more weight. But we know this is not true. On the contrary, optimizations do positively affect ad performance by lowering ad costs and improving the ad’s position on page 1.
Main factors that go into Google’s Ad Rank
Google Ads calculates Ad Rank for every ad in the auction. Ad Rank determines your ad position and whether your ads are eligible to show at all. Generally speaking, the ad with the highest Ad Rank gets to show in the top position and the ad with the second-highest Ad Rank gets to show in the second position (assuming the ads clear the relevant thresholds), and so on.
This is going to be a lengthy post but please bear with me. In the end, I will show you why it is not that difficult to optimize for Ad Rank. There are a total of 6 main factors that comprise the high-level view of Google’s Ad Rank algorithm. These are as follows.
Your bid or max CPC
When you set your bid, you’re telling Google Ads the maximum amount you’re willing to pay for a click on your ad. How much you end up paying is often less, and you can change your bid at any time. Max CPC is getting less relevant now as most advertisers have moved on to smart bidding algorithms. Things like max conversions with TCPA or max conversion value with target ROAS do not require you to set a CPC, but a result you want the machine to achieve. Google then takes that goal you set for them to determine the Max CPC it can bid on your behalf.
You can only influence this factor by increasing your campaign daily budget if you are on a smart bidding strategy or increasing your max CPC if you are using manual bidding.
Ad Rank thresholds
To help ensure high-quality ads, Google has set minimum thresholds that an ad must achieve to show. This is an added layer on top of market competitiveness (competitiveness of auction). This is to ensure that even if the auction is non-competitive, you still have to hit a certain level of Ad Rank to show on page 1. This is best illustrated by Google’s documentation.
Assume five advertisers are competing for a maximum of four ad positions above search results on the Google search results page. The respective Ad Rank of each of the advertisers is, say, 80, 50, 30, 10, and 5.
And if the minimum Ad Rank threshold to show above the search results is 40, then only the first two advertisers (with Ad Ranks of 80 and 50) exceed the minimum and show above the search results.
If the minimum Ad Rank necessary to show below the search results is 8, then two of the three remaining advertisers (with Ad Ranks of 30 and 10) will show beneath the search results. The advertiser with an Ad Rank of 5 didn’t meet the minimum Ad Rank and so won’t show at all.
Google did not provide any official thresholds for different markets and industries. So there is no way of knowing your industry’s threshold or whether this threshold moves in real-time.
But Google clarified that ads that appear higher on the search results page have higher thresholds than ads that appear lower on the page. That way, people are more likely to see higher quality ads higher on the page.
Based on logical reasoning, we can assume that an ad for a lawyer or asset management will have a way higher Ad Rank threshold to clear than for running shoes. If bid price goes into the calculation of Ad Rank, then high CPCs markets should always have higher thresholds compared to low CPCs markets.
So even if there is no competition for the search, you will still have to clear a threshold to serve your ads.
Competitiveness of auction
If two ads competing for the same position have similar Ad Ranks, each will have a similar opportunity to win that position. As the gap in Ad Rank between two advertisers’ ads grows, the higher-ranking ad will be more likely to win and may pay a higher cost per click to benefit from the increased certainty of winning.
This is the basic economics of demand and supply. If you are in a highly competitive PPC field, where a lot of competitors are bidding the same keywords and want the same position as you, there will be fewer chances for your ad to show above the search results, unless your ad Quality Score is near perfect or your budget is way bigger than what your market is spending.
If your market is lowly competitive, you just have to clear the Ad Rank thresholds for your ads.
Context of user’s search
With the ad auction, context matters. When calculating Ad Rank, Google looks at the search terms the person has entered, the person’s location at the time of the search, the type of device they’re using (e.g., mobile or desktop), the time of the search, the nature of the search terms, other ads and search results that show on the page, and other user signals and attributes.
Impact of extensions and other ad formats
When you create your ad, you have the option to add additional information to your ads, such as a phone number, or more links to specific pages on your site. These are called ad extensions. Google Ads estimates how extensions and other ad formats you use will impact your ad’s performance. Ad extensions are fairly clear, you should always be using as many as you can, and there are free.
Ad extensions are part of ad formats and the most common of all. For example, visual enhancements to search ads that more prominently display information about your business, such as a phone number, or your website’s domain in the headline are all part of ad formatting. In addition, customer reviews that show on your ads can also be counted.
Our advice is to use as many ad extensions as applicable to your business. It does take a bit of effort to get them set up, but it is free. Extensions can either be used on the campaign or ad group level. Remember that Google strives to serve the most relevant and helpful ads to users, so if it makes sense to have some extensions at the ad group level, do it.
The quality of your ads and landing page
Lastly, Google Ads also looks at how relevant and useful your ad and the website it links to are to the person who’ll see it. Google’s assessment of the quality of your ad is summarized in your Quality Score, which you can monitor—and work to improve—in your Google Ads account.
This score is measured on a scale from 1-10 and is available at the keyword level. A higher Quality Score means that your ad and landing page are more relevant and useful to someone searching for your keyword, compared to other advertisers.
Quality Score is calculated on the combined performance of 3 components
- Expected clickthrough rate (CTR): The likelihood that your ad will be clicked when shown.
- Ad relevance: How closely your ad matches the intent behind a user’s search.
- Landing page experience: How relevant and useful your landing page is to people who click your ad.
Please note that Google Ads does not take Quality Score number as an input factor into Ad Rank calculation. This is to much contrary of what the PPC community has believed. Many advertisers think that it is used as a multiplication factor in calculating the Ad Rank. The general acceptance is that Ad Rank is calculated by Max CPC x QS x (the host of other signals, of a smaller weightage) = Ad Rank. This is inherently false as Google’s documentation has repeated many times that QS number is not a factor in the Ad Rank calculation. It is merely used as a diagnosis tool for advertisers.
I hope to update this post to include more information on this, as this is wide controversy from what the PPC community understands. Meanwhile, understand that the quality of your ads and landing page is what is factored into the calculation of Ad Rank. So, things like CTR and Relevancy are very important. The scoring system is merely for you, the advertiser, to understand how you are doing.
Google does not take the quality score number as an input into Ad Rank calculation.
What we can optimize for
Out of the 6 key factors given, only 3 are within our control (or 2 if you don’t count the first one.) So we will start from easiest to hardest to optimize.
1. Your bid or max CPC
The most straightforward way to increase your Ad Rank is to just increase your budget or CPC. This one takes the least work as well. As obvious as it is, the problem with most businesses is that they are not financially able to freely increase, or even have no cap on their advertising budget (as Google suggests) and let the machine handle it all. So let’s skip to the next point.
2. Impact of extensions and other ad formats
This is entirely within our control, and it only takes some work. You might need to take half a day to properly set up all your ad formats as there are many types of ad extensions. Also, be sure to enable dynamic ad extensions. In the case where your manual extensions do not show, Google can run ad extensions on your behalf. Your manual ad extensions will always be prioritized over dynamic extensions.
3. Quality Score
The final one is Quality Score. This one takes the most effort and time. And it is usually an ongoing effort instead of a one-time fix. Fixing ads for relevance involves iterative testing, which takes time. Landing pages might pose a bigger issue and a makeover or overhaul might be needed to improve on the page experience. New landing pages may have to be created to direct ads to a more relevant page. Depending on the scale of the work, these may require an optimization planning framework and budgeting.
Compared to the 2, optimizing for quality score takes the most effort and longest time. But it can also give the greatest returns to your business.
Ad rank in summary
And there you have it! Now you should have a clear understanding of how Ad Rank is calculated within Google Ads. There are 6 main factors that make up the high-level view of the Ad Rank algorithm. There are likely to be many more signals and smaller factors that make up Google’s calculation that are not yet disclosed to us. Remember that the ad algorithm is probably way more complicated than the mainly touted Max CPC x QS + Ad Extensions formula.
Out of the 6 factors, we can only control 3. And out of the 3, excluding raising your budget, we can only influence 2. So, it’s not too much work. But, still, it is essential to have an understanding of how Ad Rank calculation works broadly. Especially if you are a business owner that is just getting into learning PPC, or a seasoned PPC professional with years of experience.