Google Explains Quality Scores In AdWords

In the auctions, advertisers enter bids that reflect how much they are willing to pay for a click on their ad -- this is called their maximum cost per click (CPC). Ads are then ordered by the product of the bid that is entered and the estimated ad quality score. People often ask why ad quality enters the formula -- isn't the bid per click enough? Why can't advertisers just buy their way to to the top ad position? To see why both components are important, let us look at a simple example.

Suppose that two advertisers are bidding on the keyword "jet airplane." Joe's Jets is selling actual jet airplanes, while Moe's Models is selling models of jet airplanes. Since jets are expensive, Joe is willing to pay a lot per click. But not many people can afford to buy jets, so Joe won't get many clicks. Moe, by contrast, is willing to pay a lot less per click, but he will also get many more clicks.

Which ad should be listed higher in the "sponsored links" section of the search results page?

What matters in this decision is not simply an advertiser's value for a single click -– the maximum CPC that the advertiser is willing to pay -- but rather the total estimated value of showing that ad: the value per click times the number of clicks that the ad is likely to receive.

So why are quality scores important? Answer: they lead to a better auction by allowing advertisers to buy clicks, publishers to sell impressions, and users to see relevant ads.

 

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http://googleblog.blogspot.com/2008/10/quality-scores-and-ad-auctions.html