Sep 16 2008
Over the next couple days Google will be changing aspects of their Adwords algorithm that will likely have an effect on every advertiser currently using Adwords. Quality Score will now be determined in real time, no keywords will be marked ‘inactive for search’ and most importantly ‘minimum bid’ will be replaced by ‘first page bid’. The last change is likely to have the greatest effect on advertisers.
If you are bidding for a keyword without much competition then you will probably not be affected that much but for advertisers who are bidding on highly competitive keywords costs are likely to rise. Google is now going to provide an estimate on what the cost would be for your ad to appear on the first page of the search results. The bids are based on the exact match version of the keyword, the ad’s Quality Score, and current advertiser competition on that keyword. Google believes this will be more valuable information to the advertiser as opposed to the ‘minimum bid’ because it will help advertisers better understand what is necessary to have their ad on the first page. Now advertisers will see this new bid estimate and probably have to raise their current bid to get on the front page. This means costs will now be rising because people are bidding more, the competition is now even higher and the new ‘first page bid estimate’ will rise even higher.