In class we discussed the basic example of how Google determines which advertiser gets which slot in the sponsored search results.  However, Google does not just care about the bid of each advertiser.  It is easy to spend money while creating a relevant ad and site require significant amounts of time.  As a result, in 2006 Google introduced the concept of quality score to its Adwords program in order to combat Black Hat SEO (Search Engine Optimization), aka spammers.  [http://www.softwareprojects.com/resources/traffic-attract-customers/t-what-is-quality-score-1296.html]

So what is this quality score, and how does it affect Adwords? http://googleblog.blogspot.com/2009/03/introduction-to-ad-auction.html  has a nice discussion of the topic.  Essentially, each ad is given a quality score which is based on the ad’s click-through rate (number of clicks divided by number of views), ad relevancy (what types of words do you use in the ad) and landing page relevancy (Is the page your ad links to relevant to the ad? Does it create trust with users?).  This quality score is then multiplied with your monetary bid to create your AdRank which is essentially your new bid for the auction.  After this, the auction is the same as we discussed in class where an advertiser pays just enough to win his slot.  However, the currency in this auction is AdRank and thus one can save advertising money by achieving a higher quality score.

The notion of quality score was motivated by the observation that users do not pay attention to spam.  Moreover, they actually shun sites which have too much spam.  Additionally, since Google makes 95% of their revenue from search advertising they want highly targeted ads which users will click on since they only make money when a user clicks.  If an advertiser has a high bid, but users do not click on the ad then Google will not make money from that ad.  Quality score also aligns with Google’s philosophy for the web: webpage designers should create high-quality content.  Quality score is Google’s attempt to identify high-quality content and reward designers for making that extra effort.