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4 Reasons You Should Start Obsessing About AdWords Quality Score

Larry Kim
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Last October, Alistair Dent wrote an interesting – if somewhat misguided – post about why you shouldn't worry about quality score. I've been meaning to respond since I read the piece, but hey – better late than never, right?

I want to explain why you should, in fact, be obsessed with your quality score. OK, maybe not "obsessed," as it's probably not healthy to obsess about anything, but your quality score is veryimportant and you'd be crazy to ignore it.

Your quality score should keep you up at night. When you do finally manage to drift off into a fitful sleep, you should be dreaming about it – or having nightmares about it, depending on what it actually is.

Simply put, if you're an AdWords advertiser, improving your Quality Score should be at the very top of your agenda. Why? Let's go over four reasons why Quality Scores are so important.

1. Better Positioning

The AdWords game is a lot like real estate – it's all about location. Although there are numerous factors that determine your ads' positioning, Quality score is an important metric. Google makes more money from ads with a high probability of being clicked, and that are positioned prominently on SERPs and across the network.

Quality score isn't precisely the same as predicted click-through rate – but the two are pretty close. However, this is where some AdWords users lose their way.

While some advertisers might think that throwing money at a campaign by bidding higher on competitive terms is an easy solution for overcoming a poor quality score, this isn't the case. If it was, then advertisers with terrible ads could compensate by simply bidding more. This wouldn't add any value to the user experience and would result in poor-quality ads being displayed more prominently – hardly an ideal situation.

How AdWords Ranks Competing Ads

In the preceding figure, you can see that ad positioning is determined by Ad Rank. This, in turn, is calculated by multiplying the Max Bid by Quality Score. Ads with higher Quality Scores, but lower Max Bids, could place higher, as shown in the figure above.

2. Lower CPC

The second reason you should be preoccupied with your ads' Quality Score is the impact it has on how much you're charged per click. Sure, huge businesses with vast monthly AdWords budgets might not be too worried about their CPC, but for the average advertiser, a high CPC can make or break the effectiveness – and basic economic viability – of a campaign.

Cost Per Click on AdWords

Breaking down how Quality Score affects your CPC is simple. CPC is calculated using the formula of [Ad Rank of the ad below yours / Quality Score + $0.01]. Based on this formula, the higher your Quality Score, the lower your CPC will be – so why shouldn't advertisers be obsessed with their Quality Score?

3. Lower CPA

The importance of a high Quality Score doesn't end with lower CPC. Quality Score also has a significant impact on Cost Per Acquisition (or Cost Per Conversion), another crucial metric for most AdWords advertisers, especially those primarily focused on e-commerce, lead generation or direct response marketing.

We recently compiled data from hundreds of WordStream clients – totaling several million in annualized spend – and plotted the average CPAs against impression-weighted Quality Scores. What did this tell us?

Higher quality scores resulted in lower CPAs.

Cost Per Conversion vs Quality Score

Most businesses have an average Quality Score of 5 on the scale of 1-10. For every point higher than the average of 5, advertisers' CPA decreased by an average of 16%. Conversely, for every point your Quality Score falls below 5, your average CPA will increase by a similar percentage. While conversion rates remained pretty steady regardless of Quality Score, higher scores resulted in dramatically lower CPCs that caused the lower CPAs.

Some people argue that lower CPC isn't the same as lower CPA. A few even go as far to claim that you should forget about CPC, and that CPA is all that matters. However, our research shows that the two metrics are closely aligned.

Although CPC and CPA are related, the distinction between them is crucial – optimizing for CPA and optimizing for quality score is essentially the same practice. Having a lower quality score will increase your average CPA (compared to your competitors), which will harm your overall ROI.

Can you see a pattern emerging here?

4. More Profitable Campaigns

If an AdWords campaign is resulting in profitable conversions resulting from low-quality keywords, what would happen if those keywords had higher quality scores? You guessed it – the campaign would be even moreprofitable, and I'd love to meet the business owner who isn't interested in making more money by spending less.

Some advertisers argue that there are certain instances when it's impossible to improve quality scores, especially those operating in highly specialized niches. However, this simply isn't true, and no search engine marketer worth their salt would make this kind of generalization.

After researching thousands of AdWords accounts across 250 industries, we found distribution of both high and low quality scores across the board, meaning that it is possible to achieve high quality scores even in highly niche areas. Throwing your hands up in the air and saying it's impossible to improve quality scores for competitive search terms isn't just wrong – it's lazy.

Dent raised some good points in his article – namely the necessity of crafting compelling ads. Why is this so important? Because click-through rate, another vitally important AdWords metric, is largely determined by the quality of your ads themselves and the commercial intent of the keywords you pick.

However, our research shows that your quality score is impacted primarily by the CTR of your keywords/ads relative to the expected CTR for your current ad position – meaning the better your ads, the better your CTR, the better your quality score. See how that works?

AdWords advertisers should assume that the quality score of their ads can always be improved. Unless you're one of the (very) select few with a quality score of 10, this advice is right on the money. Even if your quality scores are above average, you can still do better. As the examples above clearly demonstrate, quality score most definitely does matter.

Summary

Anyone who's ever played the tables in Las Vegas knows that, ultimately, the house always wins. However, Google isn't a casino, and AdWords advertisers aren't gamblers. You don't need to be card shark to tip the odds in your favor, but you do need to understand the rules of the game – whether you like them or not – if you want to play.


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