Ads that are placed above the search results generate a much higher volume of clicks when compared to those placed on the right side of the search page. The clickthrough rate is also much higher if your ad takes the top position, but the conversion rate is not always as good. Top positions generate a lot of impulse clicks that are less likely to convert into a sale. Is Google planning on moving more people into the top positions? They describe the change as follows:

With this new formula, instead of considering your actual CPC, we’ll consider your maximum CPC bid, which you control. This means that your ad’s eligibility to be promoted is no longer dependent on the bids of advertisers below you. Therefore, if you have a high quality ad, you now have more control to achieve a top position by increasing your maximum CPC.

Your actual CPC will continue to be determined by the auction, but subject to a minimum price for top spots. The minimum price is based on the quality of your ad and is the minimum amount required for your ad to achieve top placement above Google search results. As always, the higher your ad’s quality, the less you will pay. And you will never be charged more than your maximum CPC bid. [read more]

The mention of “minimum price” says it all. Google is going to start setting a baseline max CPC for all ads that get listed in top positions. This is possibly as a result of the new information that Google now has access to with it’s recent purchase of DoubleClick/Performics. Many fear that as Google is able to follow each search all the way to the checkout process they will want to raise prices to compensate for those earning an extraordinary ROI. Could this be happening already?

It is not likely that they have already integrated conversion and ROI data into what they demand for click prices, but that situation might not be too far off. Click prices are going to continue to rise as they have for the last several years.

“Quality” is calculated based on conversion rates and other measurements of the ability to deliver more interested and valuable customers to you from particular distribution partner sites. Discounts will be automatically applied to your account.

Apparently click discounts will start taking place today and they will be automatically credited. No changes by the end user are necessary. We will all begin receiving a discount on clicks. Who can complain about that? How significant that discount will be remains to be seen, but I hope some readers will post their experiences in the comments.

Those who extensively use the content network and Yahoo search affiliates will likely see the lion’s share of the discounts. Yahoo is recognizing that their search affiliates and content network do not provide the same level of quality that the standard search results offer.

Everyone who has done any significant search marketing already knows this, but it is interesting that Yahoo would come right out and admit it. I think it is a good move in the direction of greater transparency. Yahoo is continuing to roll out improvements to their Panama platform. Preliminary results are good, but whether or not they will increase market share remains to be seen.

I find myself thankful that Google is not the only game in town. Competition is good for everyone. Now if MSN could just get their search marketing platform in order, we might see some serious innovation.

As we have discussed on this blog, affiliate marketers have been scrambling to regain their Google paid traffic ever since Google implemented it’s infamous quality score algorithm. There is no fighting it. The quality score algorithm is here to stay. Mike is pointing the way search engine marketing is now headed.

Search Engine Marketing is Dead…at least as we have come to know it in the past. The days of bid power have dwindled, and a time of synergy has emerged. Synergy between account structure, keyword bids, ad copy and landing page quality is now the undeniable recipe for search success.  Never before has a thorough understanding of the mechanism or funnel of search been more important. In fact, not being an expert on the various pieces of search will leave you in a constant state of bewilderment: Why can’t I get to the top of the listings for my best converting terms? Why does the chart mapping my ROI show a continued movement toward higher CPC’s and less profitability?

The answer is easy…its called Quality Score Optimization (QSO), and it’s the only way to professionally approach search engine marketing in 2007.

The problem many smaller search engine marketers face is the amount of testing it takes to optimize a paid search campaign with QSO. Paid search is no longer the easy entry point for those who know nothing about SEO. Search engine marketing is going the way of SEO. SEM’s will have to chase after Google’s newest algorithm, which like their natural one, will likely continue to change.

Search engine marketing is an ever changing landscape. At times we get a glimpse over the horizon and see where we are headed. Mike Jones at Pepperjam Search just had one of those moments and shared it with us all.

With this new affiliate policy, we’ll only display one ad per search query for affiliates and parent companies sharing the same URL. This way, users will have a more diverse sampling of advertisements to choose from. As always, your ad will be displayed based on its Ad Rank for given searches, which is determined by a combination of your ad’s maximum cost-per-click (price) and clickthrough rate (performance).

The rest is history as they say. Many PPC affiliates lost their bread and butter virtually overnight. Ever since, affiliate managers have had to closely guard the use of their domain as a display URL, because if they didn’t their affiliates would outcompete them for the one PPC spot available for each search.

Some affiliate programs have just prohibited the use of the keywords that the in-house search engine marketing team uses. Under this model, the affiliates are allowed to use the remaining keywords and variations. But that has caused trouble with broad matching, and it requires using the prohibited words as negative keywords. Unfortunately, many affiliates are unaware of how to do this. So, affiliates get a bad name for bidding on keywords they are not supposed to be bidding on. Affiliate managers get frustrated and the search engine marketing team is livid.

Now if we fast forward to the most recent “slap” Google has given to affiliate marketers, we have to talk about landing page quality score. Now Google is not only interested in the CTR, ad copy, trademark use and display URL; they are also interested in the content of the landing page. Many believe, and I have to agree with them, this goes beyond just the landing page. Google Adwords now evaluates your entire site and gives it a quality score based on the relevancy of the content to the keywords you are trying to buy. The end result was that affiliates who were enterprising enough to develop landing pages so their display URL would be different from the merchant they are promoting, again lost a majority of their PPC traffic overnight. Google called affiliate landing pages “doorway pages” and expressed the opinion that they brought down their overall user experience.

The simplest solution I see to this problem is for affiliate programs to start buying a single domain to host landing pages specifically for use by affiliates for PPC marketing. The landing page would not be considered a “doorway page” by Google if it was owned & operated by the merchant and it did not have any affiliate links on it.

Now affiliates would have to compete for that one display URL but it would not interfere with any in-house search engine marketing by the merchant. This method would also help eliminate competitors from the results by preserving top spots on the search results pages for in-house and affiliate efforts.

Let me know what you think.

Thanks go out to Mind Valley Labs for running this test, proving the importance of account history in Google Adwords. This is something a lot of us have suspected for a long time. Read the full post: Shocking Results! How New Google AdWords Advertisers Get Crushed (Test Results Are In!)

Google Adwords may not be the online advertising program for affiliate websites.

The case is settled. Google is apparently trying to weed out affiliate advertisers from their Adwords program in an effort to “increase the quality” of their user experience. This is a legitimate end, but I think they have gone too far. I am certainly not one of those Google haters who endlessly posts complaints about how their site was removed from the index, but to remove thousands of advertisers carte blanche. I really don’t know what they are thinking. Isn’t the affiliate business model a legitimate one? They seem to think it isn’t, and if Google has it’s way, the affiliate model will be a model of the past.

As you probably already know, since Google started evaluating the quality of landing pages in it’s bid calculations, affiliates have seen their bid prices jump from $0.50 to $5.00 a click. This makes it a bad investment for affiliate marketers. There is no ROI when you are bidding $5.00 per click for most programs. It appears this is exactly Google’s intention, as disclosed in the above comment. They do not want affiliate money. They do not want our ads on their results pages. I have a hard time believing that the whole plan is simply to improve “user experience”. I admit that many affiliate sites are not the highest quality, but there are just as many that are of excellent quality and they are facing the same problems.

As a company, we performed our own series of tests to see what might improve our quality score, and we saw minor changes, but on the whole the changes were ineffective. Google Adwords has no advice to offer other than saying your pages are “poor quality pages” without giving any reason why. Actually, they have the gall to tell me that if my review pages were actually a part of the merchant’s website, then it would be a high quality page. That is tantamount to saying, “if you were not an affiliate you would have a quality page.”

I suspect Google has an agenda beyond the improvement of their user experience. There seems to be a concerted effort to weaken the affiliate community, and their efficacy. The way Google has been operating over the past 18 months, I think they are attempting to eliminate competition and to expand exponentially. Google has been buying up just about every net startup they can: JotSpot, MarketingVOX, Keyhole, Android Inc., YouTube, Applied Semantics and more. At the same time they are trying to compete with Paypal through their recently released Google Checkout. Google is no longer just a search engine. They are an enormous corporation pervading just about every corner of the internet. That is not necessarily a bad thing if they bring value and innovation to the public. But this pattern of expansion leads me to conclude that Google has the intention of getting into the affiliate market in one way or another. Affilaite marketing is big business; too big for Google to ignore.

I wouldn’t be surprised if Google is trying to put together a network that will join advertisers and publishers in a relationship similar to the affiliate model. They must be looking to compete with big players like Commission Junction and Linkshare. I would expect Google’s entry into the affiliate market to look something like a CPA network, with pay-per-call integration for local advertisers.

Through the use of Google Analytics, tied in to Adwords conversion tracking, Google must be accumulating the largest database of information on conversion rates in history. What better way to put this information to use? They want a share of everyone’s sales, and the only way to have it is to get into the affiliate business. In some ways it is ingenious, and it may server to bolster the affiliate community in the end, but in the mean time, Google is creating hard times for affiliate marketers. We are forced to seek out new ways of advertising our websites. But affiliate marketers are an adaptable bunch, and we will not be stopped by something like this. Adapt or die? Naturally, we adapt.