Few years back managing Pay per click engines wasn’t so difficult. There were less players but bidding system wasn’t so complicated. Google AdWords at that time was ranking ads based on a combination formula of Maximum CPC (cost per click i.e. in simple word your bid) and Click Through Rate (CTR). While other players like Overture (now Yahoo! Search Marketing) had a simple system of ranking ads based on purely bids. The highest bidder was given No.#1 position.

Whether few years back or today, Google AdWords was the most complicated system and yet today it has complex rules of ranking ads. But most importantly even Yahoo! and Microsoft adCenter have started giving more relevance on performance and quality based results. Google, Yahoo, and Microsoft’s Live Search are the three major search engines who have started weighing more relevance on landing page, performance and other non CPC factors to rank ads. All this rules and system which are introduced can mean one thing – to improve search results.

This may be bad news for Mr. Money Bags who had to previously only throw money (except in Google) to gain high rankings. But it may also work to your advantage if one can understand the rules & system properly and accordingly design the campaign. Let’s have a brief look at what is being introduced here:

Google AdWords

By far the most complicated and interesting system to be designed. To make it simple the ads are ranked on two factors – Quality score and maximum bid. And on what factors does the Quality score depends on? Most importantly what is Quality score? To keep things simple let’s not divulge in much details. Quality Score is a qualitity which is determined by factors like

1) Keyword click thorugh rate (Keyword CTR)
2) Ad Copy click through rate (Ad Copy CTR)
3) Account history
4) Most Recent history
5) Other Relevancy factors (there can be many other relevancy factors but advertiser can focus on the above mentioned 4 factors)

In essence what Google tells you is that if you excel and perform better in all the above mentioned factors then your overall performance would be considered better and that would work in advantage for you. This could mean that with good performance in Quality score you can gain higher position with less bid with respect to your competitor.

Yahoo! Search Marketing

Google uses the term “Quality score” then Yahoo uses the term “Quality Index”. Yahoo ranks it’s ad based on two factors – Quality Index and Bid. So what is this Quality Index? It sounds similar to what Google AdWords has been using. Is it same and complicated? No! It’s not same, but complicated? – well that depends from person to person

Let’s take a look at Quality Index. Quality index is determined by two factors:

1) Ad’s CTR (click through rate) historical performance relative to it’s competitors.
2) Ad’s expected performance which is determined by Yahoo’s ranking algorithm compared to the existing competitors displayed at same time.

To make it simple, it is the CTR and bid which determines the ad ranking in Yahoo’s Panama system.

Microsft adCenter

Well, Microsfot adCenter hasn’t used any specific terms like Quality score or Quality index but they have specified certain guidelines which affects ad ranking. Apart from bids following factors determine the ad ranking:

1) How close keyword (user search query) is relevant to Ad Copy
2) How close is the user search query relevant to the landing page
3) How close is the query relevant to both ad copy and landing page
4) How unique is ad copy as compared to other ads. In essence adCenter tries to remove duplicate ad copies from it’s search results to improve user search experience.

Overall these systems award high rankings and less cost for advertisers who give hard work. I don’t foresee smaller tier engines introducing such “Quality based” rankings in their sponsored system, but one can never know.