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Assessing the Impact of Google’s May Ad Rank Changes

In early May, reports surfaced that Google made changes to both how it calculates the minimum ad ranks required for an advertiser to show on the first page and top of page results, as well as how individual advertiser’s ad ranks are calculated. Both updates hinged on adjustments made based on query meaning, though the confirmed details are sufficiently vague that it’s difficult to assess exactly what types of queries will be impacted and in what way.

Given Google’s timeline that these updates would roll out over the course of May, here we take a look a look at how some key metrics are trending now that the changes should be fully implemented.

Brand Minimum Bid Estimates Down, Non-Brand Minimums Up

Google’s first page and top of page minimum bid estimates often shift when Google makes adjustments to the ad auction. Indeed we do see movement for these metrics, as brand estimates are trending lower and non-brand estimates higher for the period following the early May update compared to previous estimates.

Brand CPC Trending Down, Non-Brand Holding Steady

In turn, brand cost-per-click (CPC) Y/Y change has been trending lower since early May, and it appears that advertisers have some reason to cheer Google’s update at this point.

On the non-brand side, Y/Y CPC declines have gotten slightly smaller since the update, though it appears that could be part of a trend that’s been going on over the first few months of 2017.

In the case of non-brand keywords, if these updates were to increase the cost of traffic for some keywords, advertisers would be forced to cut spend in at least some areas of their account in order to maintain the same return on ad spend as prior to the change. Thus, it’s not clear that CPC would necessarily go up as a result of these changes.

By comparison, brand keywords typically aren’t held to strict return on ad spend goals in the same way non-brand keywords are, since brand terms typically convert at very high rates and part of the goal of these ads is brand protection.

However, if advertisers were being forced to reduce non-brand bids in order to keep CPCs in check as a result of these updates, we would expect some sort of impact to traffic as some keywords fell off the top of the page or off the first page entirely. Looking at Y/Y click growth for the median Merkle advertiser, we find that non-brand text ad click growth actually accelerated for both desktop and phones in May relative to earlier in 2017.

Declines in tablet traffic did get more severe in May, but tablets accounted for just 10% of paid search clicks in Q1. Phone and desktop traffic is thus much more important for brands, and we haven’t seen any signs of a negative impact to ad clicks on either of these two device types.

This is in contrast to what happened to click growth in 2014, when non-brand first page minimum bid estimates skyrocketed beginning in Q3. In turn, click growth stalled out over the back half of 2014 and first two quarters of 2015, until Google changes to increase the number and size of ads on phones in Q3 2015 increased traffic.

Obviously first page bid estimates have increased much more modestly following this latest update compared to 2014. That, combined with the fact that first page minimum bids don’t actually affect all auctions since in many cases competitor bids determine the cost per click of non-brand keywords, is likely why the overall impact to performance is relatively minor at this point.

By comparison, brand CPC is typically more heavily reliant on top of page minimums and less a result of competition in most cases. Thus, the shifts in brand minimum bids likely have a more direct result on a greater share of auctions than is the case with non-brand.

No Shifts in Quality Score

While the details of the update that have emerged so far don’t mention anything about quality score being calculated differently, I was curious to see if there would be any shifts on that front as a result of Google’s intention to weight bids more heavily than quality factors for some queries. However, looking at the share of keyword by quality score for brand and non-brand keywords across Merkle advertisers, there’s been no change following the update.

Conclusion

Google’s ad rank changes do appear to be impacting minimum bid estimates for both brand and non-brand keywords. In the case of brand, the result appears to be lower CPC, a welcome development for advertisers.

Non-brand CPC is trending at roughly the same level observed prior to Google’s update, though again it’s unclear that CPC would necessarily go up as a result of this change given how advertisers would likely react to increased CPC without increased value. However, Y/Y click growth remained strong in May, indicating there hasn’t been a meaningful impact to non-brand click costs just yet. Alas, any changes might just be too small to notice given the relatively modest shifts in minimum bid estimates.

We’ll be keeping an eye on how things continue to move over the coming weeks, but for now it seems advertisers shouldn’t be too concerned about this most recent change to ad rank calculations.

 

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