Quality Score Explained by former Google Employee

With the continuing expansion of ad space at the top of the page (from ad extensions like sitelinks with descriptions), it’s more important than ever to make sure your ads have a great ad rank. But CPCs are on the rise – so unless you can improve your conversion rate so you can increase bids, Quality Score (QS) optimization may be your only way to maintain a high rank without breaking the bank.
While I’ve been a panelist representing Google in Quality Score sessions at more conferences than I can remember, I’ve been meaning to put together some of my insights on the topic for a broader audience. So, here goes….

The Evolution Of Quality Score

Even if you don’t care much for a history lesson, it may help paint a picture of why QS exists in the first place, and the evolution of factors may give you some insight into what Google cares about.
When I started working at Google in 2002, Quality Score didn’t exist. But what set Google apart from the other PPC ad systems at the time was how they determined if ads were relevant enough to warrant an impression. In addition to having a team of humans reviewing all ads, the system was also monitoring the click-through rate (CTR) of every keyword — if a keyword’s CTR fell below 0.5%, it would become disabled for poor relevance. Google was using the wisdom of the crowds to let its users determine which ads should show and which shouldn’t.
The problem with disabling keywords at an arbitrary CTR level was that advertisers were unhappy to see some of their keywords disabled forever (unless, of course, they knew of the workaround to resubmit the same keyword with different capitalization). So, we started to evolve the system. Instead of disabling keywords, we came up with new statuses like “slowed,” “in trial” and “on hold.”
The idea was to give advertisers a way to fix low-relevance keywords by giving them a small allowance to run ads that were considered poor quality so that they might prove otherwise. We also gave the system more flexibility so there wasn’t a hard cutoff at the 0.5% CTR level. Ultimately, though, most advertisers still saw keywords they really wanted to advertise on get disabled, and they remained displeased.
Google addressed this with the introduction of the minimum bid. Rather than flat out disabling keywords, they asked advertisers to pay more for keywords that had low relevance — the idea being that eventually, it would make no sense for an advertiser to keep paying the high cost-per-click (CPC), and they’d either optimize the relevance or delete the keyword.
In today’s system, the minimum bid has been engulfed by the first page bid, which also takes into account competition. It’s a little harder to see the direct correlation between what you pay and the quality score, but the connection’s definitely there.
Below is an example of where we see the correlation between the average CPC and the QS in our Quality Score Tracker tool.

As the Quality Score starts to increase, the average CPC in this campaign starts to drop.

Quality Score’s Impact On Ad Rank

When Google launched AdWords Select and started to shift from CPM-based pricing to CPC-based pricing, they couldn’t afford to lose all the revenue from their CPM program (which was called AdWords at the time). They were still a pretty small company, and Yahoo/Overture was a formidable competitor. So, to ensure revenue was maximized, they ranked ads in the CPC program according to a very simple rule:
Ad Rank = Max CPC * CTR
If you take a minute to look at this more closely, you’ll quickly see that ad rank is, in fact, equal to CPM or dollars-per-impression. This was the simple but brilliant insight that made AdWords so powerful — advertisers only had to pay when they got clicks, users would see more relevant ads because ads with high CTRs were more likely to appear high in the results, and Google was making as much money as possible from these ads.
The equation for ad rank is a whole lot more complicated these days and now includes thresholds for appearing at the top of the page, landing page factors, and more. But at the heart of it, the original principle still applies: if Google can show more relevant ads, they will get more clicks, have happier users and make more money. And, the key component for achieving this is CTR.
The importance of CTR to Quality Score is a bit like the importance of TF-IDF to SEO. While there are hundreds of factors that go into ranking in paid or organic search, these long-established principles are still some of the most important ones. In the 80/20 rule, these are your 80 percent factors and the first ones you should pay attention to.

Factors Of QS

While I’ve explained that CTR is a main driver in QS, it’s useful to understand how Google thinks about CTR. After all, there are many things that influence the CTR you see in your account such as the device, the network, or the position of your ad on the page. Thus, the average CTR you see in your account is not the CTR Google uses to determine Quality Score.
To make sure advertisers have a level playing field, they evaluate small slices of CTR.
For example, they look at different CTRs by device type so that your performance on mobile won’t affect your performance on desktops. They also have a different CTR they look at for the Display Network and Google Search — a good thing, since CTR on Display is usually much lower, and you wouldn’t want that to hurt your QS for search.
Where possible, they also favor looking at the CTR when the keyword in your account matches the search query exactly (don’t confuse this with the “exact match” keyword match type), and they normalize the CTR based on the number of ads on the page and your ad’s position amongst them.
Furthermore, Google has to make some guesses before they have a statistically significant amount of CTR data for new accounts, new keywords and new ads, and they do this by evaluating the CTR at different levels as explained in the diagram below.

The various levels at which Google evaluates CTR to determine Quality Score.

As you can see, there are 3 levels of CTR evaluation: the account, the keyword and the ad. These CTR elements are all combined into a secret formula and out comes your keyword-level Quality Score and the corresponding number between 1 and 10 that you can see in your account.

How Quality Score Is Set For New Keywords

When a keyword is new in an account, there is not a strong historical element for how the keyword performs with its ad text (factor 3), so the QS is mostly based on system-wide data for that keyword in all other accounts. That gets combined with data for how this particular account and its ads have performed historically. If these elements have good QS, the new keyword is likely to also start off with a better QS.
To give an example, if you have 2 accounts, you should see a lower starting min bid in the account with the better account-level QS. If you have 2 domains, you will see a lower starting min bid when using the domain that has a better QS.
After the system gets enough data about more specific things, like how the keyword performs with the ad you wrote for it, it will rely much more on this to determine the Quality Score. This is why it’s so important to have great account structure and split up your ad groups in a way that allows you to create great performing ad texts for each grouping of tightly related keywords.

Other Relevance Factors

According to Hal Varian, Google’s Chief Economist, QS also considers “relevance” in addition to CTR. But what does that mean? The easiest way to think about this is once again based on click-through rate — but, rather than using CTR to generate the QS number between 1 and 10 that you see for each keyword in your account, it’s used at the time a user does a search to determine if there are any correlations between that user’s search and your ad that could predict the CTR (Google’s Quality Score is a predictive system that tries to predict CTR for each ad and each query). Some examples:

1. Did the user’s search include some additional words, and do those correlate with your ad’s expected chance of getting clicked? E.g., if you have a job website and want to advertise on the keyword [jobs], your ad is probably not relevant when someone searches for “Steve Jobs.”
2. Does the location of the user have any correlation to your predicted CTR? E.g., if your business is in the US and the searcher is in Belgium, perhaps it’s less likely your ad will get the click because the users may prefer a business closer to them.
3. Does the time or day of week influence your predicted CTR? E.g., Google may know that users are less likely to click on your ad on a Tuesday.

These factors let Google assign you a real-time quality score which they can use to better rank your ad for that particular query. There could be many other “relevance factors,” but just know they’re all based on the same principle of trying to predict the likelihood of your ad getting a click based on something Google knows about that specific query.
While the lack of transparency into the factors may be annoying, this relevance component has helped advertisers by automatically giving them more good clicks and fewer bad ones.

Landing Page Quality Score

The landing page is one of the newer factors used for QS. Landing Page Quality (LPQ) started as a way to counteract bad sites that duped users into clicking their ads and hence had a good CTR but a lousy user experience. Now that LPQ can also improve your QS, it’s getting a lot more attention from advertisers (probably more than it warrants).
Remember, the CTR of your ads is still the bigger QS factor and probably the better thing for most advertisers to focus on optimizing. Every now and then, I hear of advertisers who are spending a ton of time creating one landing page per keyword so that the keyword will appear on the page and score a better LPQ. That’s probably overkill — Google is very good at understanding how words are related, so it’s unnecessary to include every variation on the page.
My personal recommendation is to also keep a close eye on bounce rates and time on site, two metrics you can see directly in AdWords when you link it with Analytics. A high bounce rate or very short time on site both provide a great way for you to find keywords that are not relevant in the minds of users.

Optimizing The Right Elements Of Your Account

If you haven’t guessed by now, optimizing Quality Score is really all about optimizing for CTR. The challenge is to optimize for the right CTR. For example, because Google uses position normalization when determining how your CTR impacts your QS, it could very well be that your ad with a 15% CTR in the top position on Google is actually worse than your 3% CTR ad in the last place on the right side of the page.
You should also look at the impression-weighted Quality Score to determine which keywords and ad groups are most in need of an optimization. I shared a script for automating the calculation with AdWords Scripts.

Google Adds Enhanced Campaigns Bid Adjustment Reporting To Google Analytics

Google announced today that Bid Adjustments reports for AdWords enhanced campaigns are now included in Google Analytics.
The reporting, found in the Advertising section under Traffic Sources in Analytics, are designed to help advertisers analyze the performance of each bid adjustment within a campaign — by device, location and time of day.
You’ll notice in the Google-provided screenshot example above, there are columns for Revenue and Ecommerce Conversion Rate in the Summary view. These metrics are available when Ecommerce tracking is enabled in Google Analtyics, allowing you to analyze bid adjustment performance by ROI. However, when you look at your own reporting, you may see that the Summary view only shows goal results and that the columns for Revenue and Ecommerce Conversion Rate appear under the Ecommerce view instead.

Give your sitelinks additional detail in enhanced campaigns

Ads that provide detail and precision can help people make more informed decisions.  Sitelinks help people find information deeper in your site so they can get to where they want to go faster.   In February 2012, Google improved sitelinks by using text from other ads in your account or My Client Center to create sitelinks with additional detail.  Today, Adwords going one step further by enabling you to nominate specific text for your sitelink descriptions from within your AdWords account.  This will allow you to control the descriptions that display when this sitelink format shows.

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In testing, users have reported that sitelinks with additional detail were more useful and relevant, and clickthrough rates were significantly higher than the same ad with traditional 2- and 3-line sitelinks.

The new sitelink format with additional detail is available only in enhanced campaigns.  Enhanced campaigns enable you to reach people with the right ads in the right context - location, time of day and device type -  without setting up and managing numerous campaigns. All campaigns will be upgraded to enhanced campaigns on July 22nd.

After upgrading to enhanced campaigns, you will have the option of adding extra text to your sitelinks - simply fill out both lines of the "Description" field when creating a new sitelink or editing an existing sitelink.

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Note that your ads won't always show sitelinks, and when they do, the format that appears could vary.

The core guidelines for sitelinks remain the same with these improvements:

• Sitelinks cannot violate the duplicate sitelink URL policy
• Sitelink text cannot use keyword insertion
• Sitelink text cannot be the same as other sitelinks in the same ad group/campaign or the main ad that’s serving
• In addition to this 4 sitelink view, there is also a 2 sitelink variation

How To Conduct Ad Tests In Enhanced Campaigns

Enhanced campaigns have brought about many changes to AdWords. One of the biggest changes yet to be discussed is the fact that your ad testing methods will have to change.
One of the “features” of enhanced campaigns is that your campaign can now run on desktops and mobile devices with different CPCs that are controlled by bid modifiers. However, since your ads can be run on multiple devices at the same time, you need to test your ad metrics by device.
This can easily be accomplished with device preference and Excel filters. First, let’s discuss why this change needs to occur, and then, how to control the ad serving to ensure you are testing your enhanced campaign ads properly.

Why The Testing Change?

Let’s say we’re testing two ads and that we’re running both ads on all devices (desktops/tablets and mobile devices). What happens is that after a while, we check our metrics and we see data that looks like this:

If you simply used this data as-is, you would assume that Ad 1 is the best ad overall and go with that ad.
However, averages hide all the useful data. You need to segment your data to truly understand what is happening. If you were to segment these two ads by device type, the data looks much different:

In reality, Ad 1 is not the best ad — it is the best ad on mobile devices. The best ad on desktop devices is Ad 2.
Therefore, you’d now want to control which ad shows on which device, and this can be accomplished with device preferences.

Device Preferences

When  you create a text ad, you can specify the device preference:

If a campaign is set to show on all devices, and you have not set a preference by ad, your ads will be shown on all devices.
If a campaign is set to show on all devices, and all your ad preferences are set to mobile, your ads will be shown on all devices.
To control the ad serving by device, you need both a mobile preferred ad and a non-mobile preferred ad in each ad group. To test ads by devices, then you need at least two mobile preferred ads and two non-mobile preferred ads in each ad group.

Image Ad Preferences

In “legacy” campaigns, most sophisticated accounts would segment their display advertising from their search ads, and their mobile display campaigns from their desktop display campaigns. Because these campaigns were already segmented by device, most marketers would just upload “mobile” ads to their mobile campaigns and desktop sizes to their desktop campaigns based upon Google’s sizes:

However, several of the sizes that are not traditionally considered mobile ad sizes can be shown on mobile devices:

Therefore, you will also want to specify the mobile preference of an image ad so that you can test your image ads by devices as well as your text ads.

An Easy Way to Determine Ad Types by Device

In the AdWords interface, it is not easy to see if you have a mobile and non-mobile preferred ad in each ad group. The easiest way to see this data is to use a pivot table and conditional formatting.
In this case, a simple pivot table was used to show the number of ads by device preference in each ad group; and then, conditional formatting was applied to highlight any cell that was less than 1.

If you wanted to make sure you were testing in each ad group, you could also highlight all cells with less than 2 ads using conditional formatting. This would allow you to see which ad groups need ads created so that you can test them.

Run Your Statistical Confidence Numbers As Normal

Once you have the ads set up and running by device, you can do your statistical confidence calculations and pick your winner — just make sure to segment the information by device.
Only use your mobile information to test your mobile ads and pick winners.
Only use your desktop information to test your desktop ads and pick winners.
Once the data is segmented by device, the way you run your numbers and pick winners will not change with enhanced campaigns.

A “Cheater’s” Way Of Testing

Creating thousands of new ads can be a daunting task — so, there is a shortcut you can use. However, please note that, as with any shortcut, there are some underlying weaknesses.
Instead of creating ads for every device type, if your landing pages have the same content (such as with responsive design) and if overall conversion actions by device are the same, then you can start with just ads on “all” devices. You can then segment the data by device type and run your statistical confidence by device.
Once you have a winning ad by device, then you can change the ad’s preference type of mobile if it’s a mobile winner and leave the desktop winners as all devices.
There are a few inherent weaknesses to this approach:

• You cannot customize the call to action by device
• When you “edit” your winning mobile ad, it must go back under review and the stats are “reset” for the ad

This isn’t an ideal long term solution; but, if you are trying to transition many campaigns and thousands of ads to mobile devices, it can be a way to start ad testing.
However, with a “good” transition, you will keep your mobile ads in your enhanced campaign by moving the mobile ads to your desktop campaigns (or vice versa) and using ad preference to keep them segmented.

Wrap-Up

Enhanced campaigns are a major change to managing AdWords. However, they do not change the underlying principles of ad testing. You must test ads — and a good ad test will not only examine the differences in multiple ads, it will also take into account segmented data such as the device where the ad was displayed.
By ensuring you are controlling your ads displayed by device type, you can be confident in your ad tests and ensure that you are keeping the best ad for your account.
Even with device segmentation, many of the previous columns on ad testing are still true – they just require a previous step – device ad control. You can still easily manage and test millions of ads and use cross ad group testing principles.

New Upgrade Center For Enhanced Campaigns Lets Advertisers Do Bulk Upgrades & More

Google AdWords is rolling-out a new upgrade center today for advertisers using Enhanced Campaigns. Accessible from the left-hand nav bar on the Campaigns tab, the upgrade center lets advertisers managing several campaigns perform bulk upgrades to multiple campaigns simultaneously and merge selected campaigns in a few simple steps.

The bulk upgrade feature allows advertisers to select multiple campaigns, choose a mobile bid adjustment, view traffic estimates and upgrade their Enhanced Campaigns with fewer clicks, making it easy to upgrade individual campaigns all at once.
The upgrade center also identifies search-only or search+display campaigns that have similar keywords and location targets, and offers a preview of possible campaigns that could be merged. Advertisers can then adjust the proposed settings, ad groups and extensions for merged campaigns.

Google notes that ad groups and budgets will be combined by default, and any campaign level settings and extensions in the Primary campaign will override Secondary campaign settings and extensions.
According the Inside Adwords blog, the upgrade center will roll-out to advertisers over the next few weeks.

How To Determine Your Hourly Bid Multipliers In AdWords

While hourly bid multipliers aren’t new, they remain a crucial tactic for optimizing your AdWords campaigns. They work by reducing your ad spend at poor-performing times of the week and increasing your exposure at the best times of the week. Here, I’m going to share the steps you can take (along with a helpful spreadsheet) to determine your hourly bid multipliers for better campaign optimization.

Step 1: Pulling An Hourly Performance Report From AdWords

On the Campaigns tab in AdWords, go to Columns>Customize Columns and ensure that you’ve selected the appropriate metrics. Performance metrics required for the spreadsheet to function properly are as follows: Campaign, Clicks, Impressions, Cost, Avg Pos, and Conv (1-per-click) — all other metrics selected in the screenshot below are optional:

Once your performance metrics have been selected, hit the “Download Report” button. When prompted, add the “Day of the week” and “Hour of day” segments:

This should provide you with all the data you need to analyze hourly performance at the campaign level.

Step 2: Determining Hourly Bid Multipliers

Similar to the template used to determine mobile and geo bid multipliers, I’ve created a basic spreadsheet to help analyze hourly performance and easily determine your hourly bid multipliers. You can download it here.
Copy and paste your AdWords report into this spreadsheet as directed. From here, you can take a closer look at the following:
a. Performance By Day Of Week

b. Performance By Hour

c. Performance By Hour & Day Of Week

If you have collected enough hourly data for each day of the week, you should absolutely make bid adjustments on an hourly basis. This process can be time consuming, as it requires making adjustments on a very granular level, but the results are well worth it.
For those times with less traffic, you can still leverage daily and/or hourly trends. For instance, looking at campaign #43 in the attached spreadsheet, it appears that there was not enough data collected on Sundays from 4:00 am to 5:00 am to make a specific bid multiplier suggestion — but you might still want to increase the bids, since the data indicate that both Sundays and the 4:00 am to 5:00 am window perform well in general.
The attached spreadsheet will only address those times of the week with sufficient hourly data, while keeping in mind that “bid adjustments for locations, days, times, and any ad group-level targeting methods can be set from -90% to +900%.” Thus, it can help you to determine relevant hourly bid multipliers between -90% and +900% when there are a statistically significant number of clicks:

Step 3: Implement Hourly Bid Multipliers In AdWords

At the campaign level, navigate to the “Settings” tab; then, go to the “Ad schedule” section. The first step is to specify when you want to make bid changes. Select a day of the week from the drop-down menu:

From there, you can you can adjust the effective hourly bid multipliers, as calculated by the spreadsheet:

Conclusion

All of this is fairly straight-forward; however, your hourly bid multipliers need to be maintained over time, hence the importance of a (semi-)automated process. Also, keep in mind that once set in AdWords, those hourly bid changes do not take into account multiple time zones. For instance, if your AdWords account is set to “(GMT-08:00) Pacific Time,” and you want to increase the bids by 20% at 1 pm, then these bid changes will occur at 1 pm PST across all PST/MST/CST/EST locations. As a result, it makes sense to break down your top campaigns by time zone in order to set more accurate hourly bids.

Geographic Targeting In An Enhanced Campaign World

AdWords enhanced campaigns will force many advertisers to change their campaign structures. One of the benefits that have been touted for enhanced campaigns is that you will need fewer campaigns, thus making AdWords easier to manage.
For mobile targeting, this is true, as the ability to target mobile devices is now gone. However, for the targeting features that are left, such as location targeting, you might not want to consolidate your campaigns just for easier management.
In today’s column, we will examine how locations affect your campaign structure and if you should change your structure to match the new enhanced campaign benefits.

Location Bid Modifiers

Most accounts do not have the same conversion rates by geography. In some cases, the changes are small; but in other cases, the changes can be quite dramatic.

In this instance, the CPA of San Antonio is double that of Philadelphia. Therefore, we would not want to bid the same for each of these locations. Before enhanced campaigns, in order to bid separately by location, we would need to create a campaign for each location and set bids based upon the keyword CPA by region.
With enhanced campaigns, this will not always be necessary. One of the great new features is bid modifiers based upon locations. With bid modifiers, you can automatically adjust your bid for each location being targeted.
For instance, we can set our keyword bids as normal based upon some global CPA numbers, and then tell AdWords we would like to bid 32% higher for the Philadelphia region and 39% lower for the San Antonio region.

Before you can set a bid modifier for each location, you must add them to your campaign targeting section. If you don’t add each location to your campaign targeting, then you will not be able to set a bid modifier by location.

The good news is that this is very simple. You set bids as normal and then automatically adjust your bid by region.
The main limitation is that this is a campaign-only setting. If you have some keywords that do better in San Antonio than Philadelphia, but overall San Antonio is worse so you’d want to use a negative bid modifier, you cannot exclude keywords from the bid modifiers nor have bid modifiers at the keyword level. Of course, having that level of control would be incredibly difficult to manage by hand, so using campaign bid modifiers is a nice middle step.
The bad news is that these changes just affect the keyword bids for the entire campaign. They do not allow you to adjust the budget or ads for each region. In some cases, you still want to make different campaigns for some locations.
If you are a national company that has never tried to manage bids or budgets by locations, this is a great feature to get you started examining how various locations affect your CPAs so you can start to bid them separately or even target the users differently by location.
Please note, the geographic bid modifier only works with CPC bidding, either manual or enhanced. As with all bid modifiers, it is not compatible with CPA bidding or budget optimizer. The only exception is that you can bid –100% (setting your bid to $0) to not show if the auction uses that bid modifier.

Controlling Budgets

Several years ago, one of the main issues with splitting out your campaigns by region for bidding purposes was that you might have a single budget target, and you didn’t care which region received the click and spent your money, as long as the correct bid was used and you didn’t go over your total budget.
The shared budgets feature fixed this issue for advertisers and created the opportunity to easily use multiple campaigns without fretting over how to split the budget between campaigns.
Some companies have budgets by region. This is common in areas where there are co-op marketing budgets involved, multiple franchise locations, or physical store locations. If you want to maintain budgets by region, then you still want to maintain separate campaigns by region as you cannot split a budget between regions with enhanced campaigns.
If your regions are large, such as the northeast, southwest, and so forth, then you can use bid modifiers within those regions to tweak your CPCs; however, your overall structure of keeping your regions separate for budget reasons is still sound with enhanced campaigns.

Geographic-Specific Ads

One of the main reasons to separate locations into various campaigns is to ensure that the ads speak to that particular geography. The most common instance of this is adding the region to the ad’s headline. However, it is also done to match offline promotions or test responses to offers by region.
If you have split out your campaigns for the purpose of using different ads by region, you will not want to reconsolidate your campaigns as you will lose your ability to specify specific ads by geography. So, if your main reason to use multiple campaigns is for ad serving, you will want to leave your campaigns separated.

Ad Extensions

The last major reason campaigns were split up by region was for extension usage. You might have different sitelinks, offers, or location extensions you wanted to use by campaign. As none of the extensions have a geographic ad serving component (except for the location extension), if you want different offers or sitelinks by region, you still need separate campaigns.
With location extensions, you can decide to bid differently for someone who is within the reach of your location extension. If you first add your location extension as a location target, you can then set a bid adjustment for someone in that radius.

If you have physical locations where you want the customers to come to your business, this is a welcome change as someone who is within a mile of your restaurant is usually worth more than someone who is 30 miles from your location.

Wrap-Up

Enhanced campaign bid modifiers make it easier to manage location-based bids if all your keywords have similar CPAs by region. The ability to set a bid adjustment based upon the user’s proximity to your location is also a welcome change. If you want a simplistic AdWords account, and yet have the ability to set different bids by region, the new enhanced campaign features are a very welcome change.
If you are an advanced advertiser who wants to change budgets, ads, extensions, or individual keyword bids by region, when you upgrade to enhanced campaigns, you will not want to consolidate campaigns just for location targeting purposes. You will still need to consolidate campaigns based upon device types, but you won’t do it for location purposes.
If you have segmented your campaigns by location, you can still take advantage of bid modifiers within the campaigns as locations often have sub-locations (states have metros, metros have cities, etc.) that will commonly have different CPAs by each region which you can micro-manage with bid adjustments. If you are using location extensions, then please take advantage of bid modifiers by location extension reach.
The launch of enhanced campaigns is one of the biggest changes Google has ever implemented, and it will change how AdWords accounts are created, structured and managed. While enhanced campaigns gave additional features to location based bidding, this new campaign type should not force you to reorganize most account structures based solely upon location targeting considerations.

Surviving Google AdWords’ New Enhanced Campaigns

In "Cheaper Clicks from AdWords Coming?,"From a article from Feb. 2012, Someone questioned whether the then unprecedented decline in cost-per-click rates would be a blip or a trend. One year later, Google apparently thinks it's a trend, as Google is requiring all advertisers to adopt its new Enhanced Campaigns.
This will likely reverse the decline in CPC rates that resulted from increased adoption of smartphones and tablets, when advertisers expected lower conversion rates from mobile traffic, and bid down their mobile campaigns. With the new rollout you will still be able to bid down mobile phone clicks, but the way you do that will be much different. If you don’t properly migrate, you’ll be automatically opted into mobile campaigns — paying higher rates — and that could significantly impact the profitability of your campaigns.
To be clear, Google’s transition to Enhanced Campaigns is an important evolution in AdWords, and confers many benefits. It’s important that you prepare for this transition, however, or it could jeopardize the profitability of your campaigns.
Five important changes you should prepare for are as follows.

1. No Segmenting for Tablets

In the past, you’ve been able to segment different campaigns for tablet users and traditional computer users. But now you will no longer be able to. The reason this matters is that many merchants bid their tablet CPCs lower or higher depending on their rate of conversion from tablet users. Since you won’t be able to target unique bids to tablet users, you’ll need to factor this conversion rate impact into your overall bid strategy, which may require you to make significant changes to your bids.

2. No Mobile-only Campaigns

In the past, you’ve been able to create mobile-only campaigns — i.e. smartphones — that target specific keywords, and you’ve been able to adjust bids for individual keywords based on performance. After Enhanced Campaigns rolls out, however, you will have less control. You will have to adjust your smartphone CPC rates, on the campaign rather than the keyword level, by creating “mobile bid adjustments.”
This screenshot shows how the campaign level bid adjustments looks for mobile devices. In this case we’re setting the mobile bid adjustment to 20 percent. In other words, if you are bidding $1 per click on desktops/tablets, your bid for smartphones will be reduced 20 percent to $0.80.

Campaign level bids will need to be adjusted for mobile devices.

3. Campaigns Automatically Opted-in to Mobile

This is perhaps the biggest reason to take control of your migration to Enhanced Campaigns, by following prompts Google will display inside your account, like the one below.

Campaigns will automatically be upgraded to Enhanced.
If Google automatically upgrades you to Enhanced Campaigns, than your campaigns will automatically be opted into Google's mobile network, and you will be paying higher rates for mobile clicks than might be profitable for you. This has the potential to hurt a lot of small businesses who don’t know any better.
The right time to migrate may not be now, however. Once you migrate you cannot revert. If your campaigns are already designated by device, you may want to wait a few months and migrate immediately before the forced upgrade takes place. Companies operating smaller campaigns that just target searches from traditional computers, however, can migrate to Enhanced Campaigns as soon as they’d like.

4. Sitelinks Now Available at the Ad Group Level

In the past, Sitelinks — i.e., additional links below the main body of the pay-per-click ad — could only be setup at the Campaign level. But now they can be setup at the Ad Group level. To understand why this is important, consider the example of an online retailer bidding on the phrase “baseball cleats.” In the screen shot below, you’ll see the advertiser has Sitelinks set up — advertising “Name Brands Up To 80% Off,” “Gift Cards,” “New Arrivals,” and “Baseball Bats.”

Sitelinks can now be set up at the Ad Group level. In this example, Sitelinks are "Name Brands Up To 80% Off Every Day - Gift Cards - New Arrivals - Baseball Bats."
The reason these Sitelinks are so unspecific is that you can only set Sitelinks up at the Campaign level, which means the advertisers had to select generic Sitelinks that applied not only to, say, baseball cleats, but myriad related concepts. Now that Sitelinks can be set at the Ad Group level, the Sitelinks could be more targeted to concepts like “Popular Cleats,” “Clearance Cleats,” or “Nike Cleats.” This will result in a more effective and more profitable ads.
The screen shot below shows the interface for creating a Sitelink, and how they can be automatically adjusted based on the time of day, or day of week. You can also set a mobile preference to target specific Sitelinks to mobile users.

Google's interface for managing Sitelinks.

5. Offer Extensions Now Available at the Ad Group Level

This screenshot details the offer extension interface, which allows you to highlight time-sensitive offers directly within your ads. For example, if your conversion rates on “Baseball cleats,” plummet over the weekend, you can schedule special sales for Saturday and Sunday that will automatically stop on Monday.

The offer extension interface.

Conclusion

I talk with many online retailers who spend thousands of dollars per month on AdWords, and less than two hours per month on the management of those campaigns. Enhanced Campaigns is likely only one of many major changes Google will make to AdWords this year. Retailers who do not continually optimize their campaigns — in light of the changes — will incur higher costs. In the case of Enhanced Campaigns, in particular, there is a big cost to ignoring the upgrade.

Should You Upgrade To AdWords Enhanced Campaigns?

Google made a huge splash last week when they announced Enhanced Campaigns. There have been both positive and negative reactions to the announcement.
If you haven’t heard about the changes, here is the quick, bullet-point list:

• The ability to set mobile-specific bids will be removed (you can do bid adjustments at the campaign level)
• The ability to target specific mobile devices and carriers will be removed
• The ability to specifically target tablets will be removed and bundled with desktop campaigns
• You can now control ad extensions by ad group
• You can now use ad scheduling for sitelinks
• You can do bid changes by geography (like mobile, this is a simple plus or minus percentage)

Some of these changes are excellent, such as ad group level ad extensions. Others will upset some marketers because they are going to lose lots of mobile targeting options.
Instead of getting on a soapbox and talking about how good or bad the changes are, I’m going to focus on whether or not you should upgrade immediately or hold off upgrading. Eventually, you will have to upgrade to Enhanced Campaigns, but you have several months before being forced to upgrade. Today, we’ll examine what accounts should be upgrading right away versus waiting to make the changes.

Who Should Wait A Long Time To Upgrade

1.  Sophisticated Mobile Accounts
If you are running sophisticated mobile campaigns, you will want to wait to upgrade. I have some accounts where I bid differently by device; device and carrier; and even some that are segmented by device, carrier and geography.

This type of granular control will be completely removed. For these types of accounts, you will want to wait and see if Google makes any changes to the targeting before you must switch to Enhanced Campaigns, and if not, you will want to really think through your upgrade strategy of combining campaigns together.
2.  Mobile Only Accounts
It is not uncommon to see small accounts only target mobile devices. These accounts often have small to medium spends, and they are focused on phone calls. When you examine their spends, they can be profitable by only spending their money on mobile campaigns, and they don’t even run ads on desktops.
In the new world of Enhanced Campaigns, you cannot only target mobile devices. You will set your bids at the keyword or ad group level as normal, and then you can choose to override that bid for mobile devices by decreasing your bid up to 100% (which means you will not be shown on mobile as your bids will be zer0); or, you can raise your bids up to 300%.
That means if you were bidding $15 per click on a mobile device, you must now bid at least $5 for desktop clicks and set your bid boost to 300%. You are going to spend some money on desktops; and therefore, your overall profits will probably decline in this particular instance. These accounts should wait to upgrade.
3.  Tablet Optimized Websites
You cannot target tablets differently from desktops at all. This means that you cannot set different destination URLs for tablets. So, if you have made a tablet optimized website, you will need to make sure that your site detects the tablet and redirects the user to the tablet site.
4.  Vastly Different Desktop & Tablet CPAs
I work on some accounts where tablet clicks are much more valuable than desktop clicks. I work on some where they are about the same. I work on others where tablets have been disabled as they are so much worse than desktop clicks.
With Enhanced Campaigns, you cannot treat tablets and desktops separately, including bid adjustments. Therefore, for accounts with vastly different desktop and tablet CPAs, you will need to start working toward blended bids before you upgrade.

Bid adjustments are only by mobile devices; not for tablets.

Phone Specific Apps

I do want to clarify one point of confusion. I’ve heard from app makers that they are going to have problems promoting their products; and to some degree, this might be an issue. However, you can make app ads that are only shown on an iOS or Andriod device (sorry, no windows targeting yet). So, for your app install, you can target just the device type.
However, if you also run ads for your app that go to your website to showcase how to use the app, those ads will show on any device type. So, if you are only using app ads, upgrading is not going to affect you. If you are using app and regular text ads, then you might wait to upgrade.
These are the types of accounts that should wait to upgrade. There are other account types that will benefit from account upgrades right away.

Who Should Upgrade Now?

1.  Accounts Doing Very Little Mobile Targeting
The downsides to the new Enhanced Campaigns are mostly around mobile. The upsides are bid adjustments and great control over extensions. Therefore, if you are doing very little or no mobile, there isn’t any downside to upgrading to enhanced accounts.
2.  Accounts Struggling With Geographic Bidding
Almost every account has different CPAs and conversion rates by geography. You can see this data in the dimensions tab:

In this account, the CPAs range from $45 to $91 in their top 9 converting cities by absolute conversions. Therefore, this account first did some segmentation by geography into high, medium, and low performing areas in order to set different bids by region. The keywords and ads are identical for each region – only the bids change.
When you make some broad statements that have many exceptions about geographic targeting, most accounts fall into one of a few types:

• Targeting a small area
• A different campaign for every geography to control bids (but not ad changes)
• A different campaign for every geography to control ads (and maybe bids)
• The campaigns are national, or large regions, and even though performance changes by region, you don’t bid separately by region

With the new structure, you can set bid changes by geography for the same keywords by only using one campaign and bid boosts.

Accounts that have struggled with taking advantage of geographic data will benefit from these changes and will see benefits in upgrading their campaigns.
3.  Accounts Segmented By Extension Usage
Ad extensions were campaign level only. Therefore, some accounts are segmented based upon extension usage. If you wanted different site links to appear for certain keywords and not others, then you needed to put these keywords in their own campaigns.
If you wanted one ad to use a location extension, but you didn’t want that same extension in another ad group in the same campaign, then you needed two campaigns. This caused some accounts to grow out of control just because of the extension usage.
The new structure allows you to control most extensions at the campaign or ad group level. Some extensions, such as social, are still only at the campaign level. You can designate some extensions as mobile-preferred and even set up ad scheduling for some extensions, such as sitelinks.

Conclusion

These are some of the more common reasons I’m seeing to upgrade or  hold off upgrading.
There are more reasons to upgrade or to postpone your upgrade. For instance, if you have several thousand campaigns, even if you aren’t doing any mobile advertising, you want to really dig into your tablet and desktop data, conversion rates by geography, keyword overlap, and more before you decide to upgrade and possibly combine campaigns. In that case, it’s not an issue of not wanting to upgrade, it is a matter of thinking through your upgrade plan.

In other cases, when you look at a desktop-only e-commerce site that can now change bids by geography and control extensions by ad group, there is no reason, except for planning, to hold off on the upgrade.
Once you are ready to upgrade, what I would suggest is not immediately upgrading your campaigns at that moment in time. Instead, make a new campaign (it can be paused; it doesn’t have to be live) so you can play with how the bidding changes will work and how the extensions will be controlled. Get some firsthand experience. Once you see how you can control the extensions and the possibilities for bid changes, then think through how you can take advantage of the changes.

Once you are ready to take advantage of the changes, or mitigate the risks in the case of sophisticated mobile advertisers, then feel free to upgrade to the new enhanced campaigns.