Eye of newt: Inside Google's AdWords auction

Or whatever it is

At a Minimum

If Google doesn't like your quality, it may even force you off that results page entirely. With each so-called auction, Google gives every advertiser a separate minimum bid, and this too is a product of quality score. For one advertiser, the minimum might be 10 cents. For another, it might be 10 dollars. And unless you bid your minimum, you can't join the bidding.

There are ways of improving your quality score - and your minimum bid. But you can't improve it unless you pay it - over and over again. And many smaller advertisers can't afford to play that game.

If your quality score is low and your minimum bid is high, you typically end up at the bottom of Google's results page, paying more for less traffic. "Roughly speaking, an ad that has twice the quality of another ad will tend to get about twice as many clicks, and will only have to pay half as much per click as the competing ad," Google chief economist Hal Varian wrote in a recent blog post. This, of course, makes it all the more difficult to improve your quality score. And so on. And so forth.

Again, Google is working to weed out what it sees as dodgy ads. But in doing so, it puts the squeeze on newer advertisers who've yet to learn the ropes - while raking in some added dough. "Even for experienced advertisers, setting up an AdWords account is a real challenge," consultant Andrew Goodman, the man who wrote the book on AdWords, has told us. "If you're a new advertiser, either you fail or Google makes a bunch of money off you."

For some, the only option is a switch to some other search platform - an option that grows less attractive by the day.

"An ad that has twice the quality of another ad will tend to get about twice as many clicks, and will only have to pay half as much per click as the competing ad." -Google

False Impressions

But at least Google acknowledges that the minimum bid exists. Though Mountain View remains largely mum on the matter, there's evidence the company exerts even more control over the alleged AdWords auction. It would seem that those who typically receive higher placement on the results page also receive more impressions - i.e. their ads appear on more pages.

With his blog post, Google's chief economist indicates that AdWords does limit impressions for certain ads at the bottom of its list. "Ads that have particularly low quality may be disabled, and not shown at all," he says.

But Mountain View may go much further. According to a study run by one high-volume advertiser, Google plays games with impressions not only at the bottom of its ad list, but at the top. For each keyword, this study indicates, the ad that typically sits at the top of the page receives significantly more impressions than the ad that typically occupies the second spot, the ad in the second spot receives more than the third, and so on.

"If you bid your ad to rank 1, you get about 60 per cent more impressions than if you bid it to rank 2. Rank 2, in turn, gets about 30 per cent more than rank 3, and below that, there is about a 10-per-cent-per-rank boost," this advertiser says.

The study compares AdWords to Yahoo!'s original search advertising platform, which was replaced in the middle of last year. Yahoo!'s old school platform was a straight eBay-style auction. The highest bid got the highest spot. And Yahoo! gave the same number of impressions to each bidder.