E-dreamz Company Blog

I pine for the days of Goto.com (later changed name to Overture, later purchased by Yahoo and rebranded as Yahoo Search Marketing). Pay-Per-Click advertising was so simple then. Ad Position and Actual CPC (cost-per-click) were both solely based on your current bid. If you were bidding $1.00, you would appear above the next advertiser paying $0.95 - and you would pay $1.00 for each click on your ad.  Naturally, Overture introduced a feature to always ensure you were paying only one cent above the advertiser below you.  So, in the example above, your Actual CPC would have been $0.96. Back then, you knew EXACTLY what your Ad Position was and the EXACT Actual CPCs of you and your competitors. This transparent platform made for some crazy bid wars; but it also spawned fun, smart competition between advertisers and automated bidding tools. Think you were smart for bidding $5 while the next advertiser is only at $1?  Well, what happened when you were 'bid-jammed' at $4.99 - forcing you to pay the pull $5? Sorry, I am getting lost in the nostalgia. 

Furthermore, there was only one keyword 'match' type - 'Exact Match'.  If you bid on 'soccer ball', you would not appear for a search for 'soccer balls', 'nike soccer ball', etc.  While the skeptics may look at this as an inconvenience, I always viewed this as an opportunity to outwork our competition.  By thinking of and bidding on every possible keyword combination, we were bringing in minimum bid clicks (as low as $0.01) that converted at an extremely high rate due to the lack of competition. Additionally, you didn't have to worry about the ridiculous key phrases for which the search engines now sometimes show your ads. 

Of course, this was the first generation of pay-for-performance advertising and was bound to evolve.  Google AdWords Select (yep, it used to have 'Select' at the end to differentiate itself from the CPM-based Google AdWords) changed the game forever by incorporating relevancy measures into the Ad Position and Actual CPC and introducing multiple 'match' types amongst many other 'innovations'.  Google created arguably the most relevant index of organic search results, and they wanted their paid ads to mirror the philosophy that had brought them so much success.  This all sounds great on the surface.  

However, I have always felt deceived by Google AdWords. Ultimately, we have always been at the mercy of Google in determining how much we were going to pay for each click on our ads. Back then, they arbitrarily voiced that Ad Rank (score for determining Ad Position) was based on some formula of Max CPC X Normalized CTR. To boot, your actual CPC was automatically 'discounted' to ensure you only pay the exact amount necessary to maintain your position.  So in all likelihood, you won't have to necessarily pay the most to appear at the top of the Sponsored Results - sounds good.

The formula for Ad Rank has evolved into Max CPC X Quality Score - with Quality Score being determined by weighted measures of CTR, Keyword/Ad Relevance, and Landing Page Quality. Google even recently put together a fantastic video explaining this formula and the formula for Actual CPC (AdRank of Advertiser Below You/Your Quality Score).  All of this is great to give novice users a basic understanding of how the Google AdWords system works.  

But what the heck will you actually pay for each click on your ads?  Without knowing the exact weights of each factor of Quality Score, how current Ad Position influences the CTR calculation within Quality Score, our competitors Max CPCs and Quality Scores - we will NEVER know.  Do we all have our Google-Goggles on to not see the truth?  Google can charge you whatever they feel like under your max CPC, and you won't even know the amount you are charged until after you have already purchased the click!  Do you EVER make ANY purchases where you don't know the price until after you hand over your money?  In real life, this would be absolutely appalling.  We are so blinded by Google's 'do no evil' mantra that we readily accept this; or worse - we don't even realize it. 

I love Google AdWords and the ability it gives advertisers of all sizes to succeed on the web; but I would really appreciate a higher level of transparency that we have all lost in 'innovation'.