Want to know why Google gives your site a very poor quality score? Do you want to compute the actual cost that Google wants you to pay per click? Here’s what you need!

In this video, Hal Varian, Google’s Chief Economist, demystifies Google Adwords Program – how your ads participate in its ad auction, the real components of your quality score, and the math behind computing your actual cost per click.

Video Source: http://www.youtube.com/watch?v=K7l0a2PVhPQ

If you don’t like watching videos and prefer reading, then here’s a summary of the video above. As what I’ve discussed at Google Adwords Fast Track, Google wants its users to have the best experience that they can get from using their service. Google thus ranks your ads according to its quality score.

According to the video, Google’s Quality Score is composed of three components:

• Click through Rate (appox. 65%)
  • How often are your ads clicked?
• Relevancy (appox. 30%)
  • How relevant are your ads to its keywords, campaigns, and ad groups?
• Landing Page Quality (approx. 5%)
  • Does your website help the users find the information they’re looking for?
  • Is your website relevant with unique high quality content?
  • Is your website easily navigable with quick loading times and minimum pop-ups and pop-unders.
  • Is your website transparent enough to its users? Do you have a privacy policy, terms of use, etc…?

Where does this Quality Score fits in the overall system?

According to Hal Varian, Google uses a concept called Ad Rank.

Ad Rank = Max Bid X Quality Score

This is how Google ranks different ads on their system:

Hal Varian’s example shows 4 advertisers with different max cpc bids and quality score. To get the Ad Rank, Google multiplies their Max Bid and Quality Score. Google then ranks their ads according to its ad rank; the highest taking the top position, X means that the ad is not shown.

How Much Do You Actually Pay Google For A Click?

Hal Varian shows the exact formula how Google computes for your cost:

Exact cost of advertiser 1:

P₁ Q₁ = b₂ Q₂

To compute for P_1:
P₁ = b₂ Q₂ / Q₁

Where:

P₁ = Actual cost Advertiser 1 has to pay
Q₁ = Quality Score of Advertiser 1
b₂ = Max Bid Of Advertiser 2
Q₂ = Quality Score Of Advertiser 2

As you can see, b₂ Q₂ is actually the Ad Rank of Advertiser 2. Using this formula (P₁ = b₂ Q₂ / Q₁), we can compute for the actual cost per click of Advertiser 1 on the following table (assuming all of the advertisers have $4 as its max bid):

The third advertiser gets the minimum bid because it has no advertisers below it. This proves that by increasing your Quality Score, you can actually lower your cost per click as it is inversely proportional to it.

How can this help you?

Using spy tools, you can actually extract and gather data like the ones above and position yourself to have the best rank having the lowest cost per click. For a more detailed explanation, you can watch the video above. For other information concerning Google Adwords, you can go to Google Adwords Support.

Others who read this post also read:

• July 9, 2009 -- Google Adwords Fast Track (1)
• September 9, 2009 -- Split Testing Basics (2)

There are a lot of changes (and a lot of slapping too) in Google these past few years. If you’ve been advertising since 2006, I’m sure you have a share on the Adwords gold mine. It’s way easier to make money online last three years than it is now.

You can just slap a sales page on your site, drive traffic to it using Google at $0.05 a click, and the money will just flow through. You can even put a website that isn’t related to your Adwords ad and still get a very low cost per click.

Why Google Changed

Being the leader in the market, Google needs to regulate these kind of things. Google wants their website visitors to have the best user experience on their search results and having a high relevancy, may it be Google ads or search engine results, is what they need to achieve.

Fast Tracking Adwords

If you want to use pay-per-click marketing to drive traffic to your site, then you need to plan to win. Google Adwords can make you money really fast, if you do it right, but it can also eat up your money faster than you can eat your lunch, if you do it the wrong way.

Plan To Win

1. Your landing page

Relevancy is the key to understanding how Google works. Google rewards you by giving a high quality score if you’re ads are as relevant as it could be to your landing page. If your ads say “pillows” then your landing page must have “pillows” on it – the keyword, theme, etc…

Your landing page’s objective should always be to pre-sell a product. One of the most important elements of your landing page – above the fold. This is what your visitors see on your landing page without scrolling down. Above the fold should have a compelling headline, a summary of what your product is all about and a call to action.

2. Your Ads

Your campaign, adgroups, keywords, and ads should all be tightly related.

Your ads should be keyword rich to attain a high quality score. You should try to put the keyword on your headline, description line 1, description line 2, and the display URL as much as possible.

If you’re having a problem with the display URL (if it’s too long), try this technique that I used on my campaigns. I learned this from Armand Morin. Use the URL?<keyword> format. For example, try putting www.riczsabido.com?makemoneyonline on your browser. It still shows my site with the specified keyword at the end of the URL. By doing this technique, your ads will be filled with your keywords on every line, thus increasing your quality score higher.

Remember that success is achieved by not trying to manipulate the system, but by knowing the system and playing 100% fully in its guidelines.

3. Your Keywords

If you’re just starting out, do not compete with keywords that have high CPC (Cost-Per-Click) and competition. There is money on these keywords, but you’re not fully equipped to tackle it head on if you’re a beginner.

Look for long tail keywords (long specific keywords) that have a traffic of at least 2,ooo searches a month. You can include long-tail keywords with searches below 2,000 in the future, as for now, you need to fill your keyword list with mid volume searches.

For someone who uses pay-per-click marketing for quite a while, they know that most purchases come from these long-tail keywords. For example: If you’re selling dog training products, look for a more specific keyword such as dog breeds -”golden retriever dog training”, “labrador dog training”, and so on…

When you start your campaign, avoid using a large list of keywords. Start with only a few (and those that have a decent search volume)  to minimize your costs and penalties from Google. Add more keywords after a week or two until you reach a thousand list of keywords.

The Last Ingredient

One of the biggest mistakes in pay-per-click marketing is not tracking your results. Even if you’re just starting out, you need to track all of the elements on your campaign. Failure to do so will lead to your defeat. Track everything – landing page, your headline on the landing page, your call to action, the headline on your ads, the keywords, etc…

Different keywords and/ or headline even with little variation convert differently. “dog training” converts differently from “dogs training”. Test, track, and refine! Use Google conversion tracking if you don’t want to buy one.

Using Google Adwords the right way will definitely give you a boost on your online business. In the beginning, don’t worry about the results. It’s a process. Learn while doing!

Others who read this post also read:

• August 28, 2009 -- How Google Computes For Your Actual Cost Per Click (1)
• October 5, 2009 -- 3 Ways To Spice Up Your Sales Letter (0)
• September 16, 2009 -- Where To Get Your Website Content (1)
• September 9, 2009 -- Split Testing Basics (2)
• September 7, 2009 -- Where Do You Start With All These “Making Money Online” Opportunities? (0)