I have heard this debate numerous times, so I felt it was time to step in and spread some truth(iness). Your ad’s rank in Google is based on three factors: maximum cost-per-click, click-through rate (CTR), and Quality Score (QS). Given the fact that ads in higher positions tend to get a higher CTR as a result of user behavior (people click the first thing they see), many SEMs have concluded that an easy way to reduce your CPC is to simply bid at a high position when you launch your ads, get a great CTR, and then surreptitiously lower your bid and position over time. The idea here is that Google’s system will have already given you a lot of credit for your CTR, and you can then pay a lower CPC to maintain a good position moving forward.

This plan would make perfect sense, if only Google was run by idiots with no knowledge of math or programming. Google’s objective is to make money. They make money on AdWords by maximizing the revenue per thousand impressions (RPI), which is calculated by CTR X CPC. If people could actually game the system by getting a quick CTR boost and then quickly reducing bids to a lower position, Google’s RPI would suffer.  So how do you stop the gamers? Well, there’s two ways to do it: normalization and sandboxing. Since I’m trying to write a blog post almost every day, I’m going to save sandboxing until tomorrow. Let’s focus for now on normalization.

Normalization means that the CTR at a given position for a given query is compared to other advertisers’ CTR at that position. So if I have a 20% CTR in position #1 and you have a 22% CTR in the same position, assuming max CPC and QS are the same, you will show up ahead of me. And if I have a 20% CTR in position #1 and you have a 2% CTR in position #2, this does not necessarily mean that you will show up ahead of me, because Google might extrapolate that my projected CTR at position #1 might in fact be 22%, so given the same bid and QS, I could still out-place you.

Do I have any proof of this? No, I didn’t even bother to research other articles online to support this point. Logically, however, it is impossible that Google doesn’t normalize, because it would cost them millions or billions of dollars. Who’s with me on this?

OK, tomorrow we’ll talk about the sandbox and how this further prevents gamers from getting cheap clicks at Google’s expense!


  1. Terry Whalen January 5th, 2011

    David, you are a gentleperson and a scholar, and I quite agree with you. The Google reps are able to articulate this pretty plainly these days – that, yes, obviously CTR is normalized – it’s relative to ad position.

  2. davidzhawk January 5th, 2011

    Thanks Terry. I think there are still a lot of rumors out there to the contrary!

  3. Jeff January 7th, 2011

    I’ve had this question repeatedly. Nicely explained.

  4. davidzhawk January 7th, 2011

    Thanks Jeff! I’ll be writing a post on attribution soon enough. . .

  5. Jordan McClements May 13th, 2011

    I agree 100% – it simply does not make sense any other way.

    But even ‘Online Media Consultants’ at Google either don’t understand this or else they are being trained to tell bare faced lies.

    Someone from Google contacted a client and said (in writing!) that they would recommend going in aggressively with bids and budgets as this would improve quality score!

    NB – one small caveat – I guess that if you are bidding enough to have your ads at the top of the search results, and you have written some great sitelinks then you have the ability to increase your CTR a bit more than your competitors and hence you could increase you QS a little bit extra that way – which isn’t an option if you are only bidding enough to be on at the side of the organic results…

  6. davidzhawk May 13th, 2011

    Jordan, many of the people who work on the AdWords advertising team know far less about the intricacies of AdWords than the average SEM agency!

  7. Terry Whalen May 13th, 2011

    Another misconception with the Google sales team is that higher ad positions will improve conversion rate. They don’t say it outright, but they imply it when they send over bid suggestions. It’s completely nuts.

    More than once the Google folks have used the argument that because high conversion rates correlate to keywords in high ad positions in the account, increasing bids for other keywords – to get them in higher ad positions – will result in huge percentage increases in conversions at the target ROI.

    In fact, there *is* a correlation between keywords in high ad positions and strong conversion rates. But the reason for the correlation is that we bid higher on higher-converting keywords. Our bidding strategy causes this correlation to be so. And of course they also use data from branded terms as part of their aggregate data.

  8. davidzhawk May 13th, 2011

    Ironically, Hal Varian argued the exact opposite here: http://blogation.net/category/conversion-rate/

    Though I tend to agree with the Google reps that CR varies by position, just not necessarily correlated (i.e. high position does not always equate to the highest CR).

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David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.