Comscore and Google’s quality improvement initiative

Comscore raised a real flap last week when it released January numbers that seemed to show a decline in Google’s advertising business. Comscore took the unusual step of explaining the numbers in a post a few days later.

In Comscore’s initial report, the number of paid clicks for Google showed a 7% month-to-month decline relative to December 2007 and flat annual growth for the year 2007. By themselves these numbers might indicate a slowdown in Google’s growth and perhaps even a decline. Analysts raised the alarm and Google’s stock price dropped.

But number of paid clicks don’t tell the whole story. Comscore believes that the main cause for the decline in paid clicks is a result of Google’s efforts to improve the quality of ads shown to searchers. Experts in paid search like Andrew Goodman, Clay Fisher, and Alan Rimm-Kaufman agree.

Google and relevance
Before getting into any details, it’s important to remind ourselves that Google has two masters to please. One is the searcher who wants relevant results to a query for information. Relevance applies to both natural and paid search results.

The second audience is the advertiser. Advertisers want their ads to be shown on keywords they purchase. They want qualified visitors to click on the ad and visit their website. For the advertiser, the purpose of paid search is not simply to drive traffic to the website. It’s to attract visitors who find the paid search ad and the website relevant.

So both of Google’s masters want a search results page that is relevant to the search.

Google controls relevancy of the natural search results by how it indexes and ranks a page. In the past year, Google has also worked to control the relevancy of the paid search results by assigning a Quality Score to each ad.

Comscore makes the argument that it is Google’s effort to increase quality that is behind the decline in paid clicks. Here are the numbers that Comscore uses to support their position.

Ad Coverage
If a page has only one ad and Google believes the ad is not relevant to the search, then Google removes it. These paid search ads are from advertisers that are simply taking advantage of a page with no ads. They have been able to buy cheap advertising space on the page regardless of whether the ad is relevant.

Ad coverage is the number of search response pages that have at least one ad on the page. The ad coverage index dropped 14% in 2007, going from 56% to 48% of pages that have at least one ad. In order to enforce quality, Google is showing fewer pages with ads than it did a year ago.

Paid Click Rate
If Google is showing fewer ads, but more of them are relevant to the search, then it might take fewer clicks for the searcher to get to a site that satisfies their search. The paid click rate in this case would decline.

The paid click rate is the average number of clicks that an ad supported query receives. A paid click rate of 0.2 means that 20% of the time when a page is returned that shows at least one ad, 20% of searchers click on one of the ads. The paid click rate declined 15% in 2007, from .26 to .22.

Revenue paid per click
Advertisers that are displaying on pages where their ad is likely to be perceived as relevant would be willing to pay more for the ad. This factor plus increased competition would increase the revenue paid per click.

Revenue paid per click increased by 21% at Google in 2007.

Impact for advertisers
It used to be that the position of a paid search ad on Google was a function of click-through-rate (CTR) and bid price. This past year Google introduced the Quality Score as a third factor. The recent Comscore numbers show that Google is serious about enforcing quality. It’s willing to take some short term declines in ad coverage and paid click rates in order to deliver better relevance to the two masters it serves, searchers and advertisers.

For advertisers, better relevance continues to make Google an attractive advertising medium. It also provides a strong incentive to improve the Quality Score on your ads. Improved Quality Scores mean higher placement on Search Engine Response Page and a decrease in your effective advertising costs.

What does it take to improve the Quality Score? We’ll look at what Google and some search advertising experts have to tell us in a future post.