As we learned in class, search engines such as Google harness the widespread demand for keyword-based advertising to generate bucketfuls of revenue. Though we discussed much of the details surrounding the use of generalized second price auctions to match slots with advertisers, we assumed fixed clickthrough rates for slots and therefore did not take into account the ramifications of ad quality on keyword-based advertising.

However, Google cares very much about ad quality. It especially does not want advertisers with low-quality ads (which will have low clickthrough rates) to bid for slots with very high prices per click. Instead, Google wants those expensive slots to go to advertisers with high-quality ads that more users will click on more often so it can make more money. To solve this problem, Google has implemented a Quality Score system. High quality ads will receive higher Quality Scores, and will be automatically placed in better positions so they are more noticeable to users. By intuition, we can see that this system rewards both Google and the advertisers with high-quality ads.

And recently, Google has declared advertisement page load times to be an yet another indicator of ad quality, and has decided to punish advertisers with slow ads by lowering their Quality Score and reward advertisers with fast ads by doing just the opposite. Google especially benefits from fast-loading ads because users accustomed to seeing fast-loading ads on Google and having a better overall web experience with Google will, over time, click on more and more ads displayed in Google’s search results, thus generating more revenue for Google. This new evaluation system also benefits the advertiser, because users are less likely to abandon fast websites.

Referenced Articles:

http://www.seroundtable.com/archives/016457.html

http://adwords.google.com/support/bin/answer.py?answer=87144