Google CEO Larry Page
Google made a big change to the way it displays advertising alongside search results yesterday, one that will likely result in users seeing bigger search ads with more links in them at the top of search pages. That’s because the change incentivizes advertisers to use more of Google’s “ad extensions” that make search ads look bigger and fancier.
The change will also penalize advertisers who aren’t using ad extensions — which is why the change is expected to result in a lot more advertisers using them, and a lot more users seeing them.
A regular Google search ad is pretty simple. It sits in a yellow box at the top of the page, shows the name of the business, its URL, and maybe a short tagline underneath. This, by contrast, is what an ad that uses ad extensions looks like (emphasis added):
Google displays ads based on a formula called “Adrank,” which picks the best ad based on the search entered. Google just made ad extensions part of its Adrank formula, the company said, in such a way that favors ad extensions:
Ad extensions and formats can now influence the position of your ad on the search results page. If two competing ads have the same bid and quality, then the ad with the more positive expected impact from extensions will generally appear in a higher position than the other.
Larry Kim, founder of search marketing company WordStream, tells us that this change should be taken into account with a factor that is not highlighted in Google’s announcement — which is that Adrank is based not just on the overall quality of one company’s ad, but the quality of competing ads, too. The result is that if Company A’s ad — using ad extensions — gets a higher Adrank and is more prominently displayed, its cost-per-click will go down. But at the same time, Company’s B’s cost-per-click for the less prominent spot will go up. Prices, in other words, are determined not just on what companies are willing to bid but on what their rivals bid too, and competing bids can drive up costs for advertisers who aren’t paying attention to that.
In other words, it’s going to get a lot more expensive for advertisers who “lose” in Adrank, and in this case specifically, those who are not using ad extensions to make their ads more useful.
Kim gave us this sarcastic translation of Google’s announcement:
We really want our advertisers to adopt ad extensions so that the sponsored ads on [Google] look even more blinged-up than ever. Unfortunately, you advertisers are a bunch of lazy bums and adoption is painfully slow. So, going forward, instead of just rewarding advertisers that use of Ad Extensions, we’re also going to also start penalizing advertisers who fail to adopt them.