When Google’s Hal Varian talks, we listen. We first met Mr. Varian – Chief Economist at Google – in his ‘Introduction to the Adwords Auction’ video and it sparked one of our most-read posts (The Economics of Quality Score) in which we took his information and used it to determine the financial of specific Quality Scores or Quality Score changes.
Last week Mr Varian spoke again, this time on the AdWords blog, but with equal import. He shared the fact that his team had studied the impact of position on conversion rate, and found that conversion rates were about the same no matter if your ads are run in position 1 or position 8.
Today SearchEngineLand published an article I wrote concerning the importance of this revelation.
While the video shared new truths that helped our understanding of Quality Score, this new information has impact almost entirely on bidding.
I’ve been spending a lot of time lately working to really understand bidding – I’ll admit it’s not something I’ve focused on before because it always seemed vastly over-rated as a factor in paid search success. I still believe bidding gets more than it’s share of attention in the PPC world, but for very different reasons than in the past.
Bidding is probably the most misunderstood component in a system full of misunderstood components. This is true because we bring assumptions about the role of bidding in an auction which turn out to be true in the modified ‘auction’ that Google and the other engines run.
The result is often wasted money, but more often it is deliberate actions which have virtually no chance of accomplishing their objectives. We change bids as if raising them will push our keywords up and lowering them will drop them down. The problem is it’s not that simple.
As the the SearchEngineLand article describes, Mr. Varian is doing us all a huge favor by clarifying how various elements of the AdWords auction and system really work. But we’ve got a long way to go…
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