Online Exclusive: Why Quality Score Is Bad News This Holiday SeasonThe new AdWords Quality Score spells terrible holiday news for new Google advertisers. We'll get to why in a second, but first a 10-second refresher on how Quality Score works.
The new AdWords Quality Score is based primarily on two things: how much you pay per click and the predicted click-through rate Google thinks your ad will get. And, while not all of that predictive aspect is based on past performance, a whole lot of it is. If your ad has done well before, Google thinks, it will do well in the future. And it's a fair assumption.
This means that an advertiser with a strong past gets to spend less for a better position. The flip side also is true: An advertiser with less of a past in AdWords needs to spend more for that good slot.
And if you don't have a past at all? If Google has little to go on to tell them how well they think you'll do - because there's no way for them to see how well you've done, because you have AdWords past, then you'll just have to pay a higher price to get a good position. If you have good search engine marketing, you'll get a high level of activity, and everything evens itself out over time as your ads turn to revenues, and your high click-through rate brings your cost per click down.
But during the holiday shopping season, that gradual normalization is much less likely. Because two things happen during holiday shopping season. First, bid prices go sky-high, on a whole slew of terms, many of which you can't avoid. Second, the same players that bid on the same highly expensive terms last year will be bidding on the same highly expensive terms this year.
For the businesses that were players last year, those bid prices might be a little less high - because they've already been able to develop a Google track record. They've advertised on a lot of the same terms for years. So they'll get to pay a little less for every click. It's the new players who are likely to end up paying some of the highest bid costs. This means that staying in the game should always costs a little more for new players; but in holiday shopping season, with holiday shopping season prices, paying more to stay in the game could cost a lot more.
The solutions. Unfortunately, the real solutions aren't solutions, as much as they're elaborations on why this problem is so hard to deal with. Because new advertisers are left with two choices. One choice is to tighten their belts and pay the higher bid costs, and hope the good positions will lead to better sales, and, as is often the case with expensive advertising, the high cost of visibility will more than pay for itself. The second choice is to decide not to advertise on very expensive terms, and hope their campaigns will fare well by just sticking with less-expensive terms.
The first choice has a clearly happy ending if all goes as planned. Advertisers pay more, but they also get ROI - and maybe even a good one. But there's really nothing to say that things will go as planned. In fact, it's entirely likely that things will go poorly: that bid prices will be so high for many good terms, new advertisers won't make a thing off of them. Or, that bid prices will be so high that they end up losing money.
If you can't afford to bid on those keywords, you'll have to go with the second option of not bidding on them, or at least on settling for a lower position than you'd prefer to have.
But not bidding on a keyword means losing traffic to the competitors who did bid on it. And for many terms, that could mean a tremendous amount of traffic and, ultimately, a huge volume of sales. Maybe you can't afford to bid on the term "teddy bear" - or maybe you can't afford a good position for that term - but that doesn't mean your competition can't bid on it at a relatively low cost for a high position. Which means that many, many people searching for teddy bears for their children will buy your competitors' toys, rather than yours.
That, in a nutshell, is the Quality Score predicament for new advertisers.
And what's the real way out of this predicament? There really might not be a good one. You should have a talk with your SEM managers about it. They'll be able to think through the question of whether you're facing a real risk and what you might be able to do.