If you’ve been in the Adwords game for any period of time, you know how important it is to continually split test your ads. In order to understand how useful it is to write high CTR ads, let me explain how Google ranks your ads and determines how much you pay per click. Feel free to skip to the bottom for the free tools to help you rapidly split test ads.
In 2005, Google made $6 billion in revenue, the vast majority of it from those little “Sponsored Ads”. Since Google gets paid each time an ad gets clicked, they reward advertisers who write ads with a high Click Through Rate (CTR).
Google ranks the position of your ad by multiplying your maximum Cost Per Click (CPC) by your ‘Quality Score’ to arrive at your ‘Rank Number.’ Your Quality Score is determined for each keyword and consists of several factors including your ad CTR (more factors). Google then uses your Rank Number to determine the position your ad will appear on the search results page (position 1 being the top of the page).
For example (take a deep breath):
Joe has a Max CPC of $.40 and a Quality Score of 1.8, his Rank Number is .72. If Sally has a Max CPC of $.65 and a Quality Score of 1, her rank number would be .65. So even though Joe has a lower Max CPC then Sally, his ad will appear above Sally’s ad.
Next, Google determines how much you will pay when someone clicks on your ad (for each keyword). So to calculate Joe’s CPC, Google takes Sally’s Rank Number (.65) and divides it by Joe’s Quality Score (1.8) to get .36. Since Joe’s ad is ranked 1 place above Sally’s, Google will add 1 cent to arrive at a final cost per click of $.37. Google would do the same for Sally, dividing the third advertiser’s Rank Number by Sally’s Quality Score.
Did you follow that? Basically, just remember that by improving your CTR you improve your Quality Score. By improving your Quality Score, your ad’s position can improve and your CPC will go down.
We improve the CTR of the ads by continually split testing two or more ads, keeping the winner and ditching the loser.
Remember that statistical significance is extremely important, so make sure to use the free split testing calculator.
Even better, use the free Adwords Optimizer to receive immediate email alerts as soon as one of your Ad Groups needs to be optimized.
Adwords Ebooks I recommend:
The Definitive Guide to Google Adwords – A good start for any Adwords beginner/intermediate. Perry Marshall has been around since the days of 1 cent CPC prices. He makes sure you don’t pay the stupid tax. Click here for my in-depth review.