Google Changes AdWords Ad Rank Calculation, Now Factors In Ad Extensions And Formats

Today, Google announced a change to Ad Rank, its ad serving calculation in AdWords that determines where your ad shows and how much you’ll pay per click. In addition to max CPC bid and quality score, Ad Rank will now factor in the expected impact from ad extensions and formats. Ad Rank is also becoming a bigger factor in determining whether ads are eligible to display with extensions and formats.

What do these Ad Rank changes mean?

Extensions and formats now play a role in the price you pay per click and in the position your ads display.

Google wants advertisers to use all the available extensions that make sense for their businesses. “Ad extensions typically improve clickthrough rate and overall campaign performance because they make ads more useful.” Better click through rates for you mean more ad clicks for Google. The company “will do even more to automatically serve extensions in the contexts when they’re most beneficial.” Advertisers don’t have to (or get to, depending on your point of view) worry about having the right combination of extensions display for a given situation:

For example, consider someone downtown searching on a mobile phone for “auto repair.” In this example, the user might be most likely to respond to your ad when they can click to call a phone number or tap a link to get directions to visit in person. So we may show a combination of call and location extensions with your mobile search ad.

Now imagine if someone were searching for “auto repair” on a laptop computer in the suburbs. Say your ad earned the 3rd ad position above the organic results in this auction. We might show your seller rating and sitelinks because that’s the highest performing and most useful combination of extensions that could be shown with your ad in this particular auction and ad position.

In addition to serving extensions according to context, Google says it will automatically show the highest performing extensions and formats, or those expected to yield the greatest click through rates.

Additionally:

When estimating the expected impact of extensions and ad formats, we consider such factors as the relevance, clickthrough rates, and the prominence of the extensions or formats on the search results page.Because Ad Rank is now more important in determining whether your ad is shown with extensions and formats, you might need to increase your Quality Score, bid, or both for extensions and formats to appear.You may see lower or higher average CPCs in your account. You may see lower CPCs if your extensions and formats are highly relevant, and we expect a large positive performance impact relative to other competitors in the auction. In other cases, you may see higher CPCs because of an improvement in ad position or increased competition from other ads with a high expected impact from formats.For now, this update only affects search ads appearing on Google Search.