Acquisio AdminThe Max CPC and quality score of a keyword determine its position, and position and quality score drive actual CPC. So exactly what effect does quality score have on cost? We first answered this question one year ago, in the now famous ‘Economics of Quality Score‘ post. (This has since become the most visited page in the history of this blog.) You should go read this now if you haven’t already. 
The central chart from that article shows the percentage discount or penalty you pay for every click based on your quality score. If you know how many of your keywords are receiving each quality score, and the amount of your spend on each, it’s easy to use this data to calculate the total cost of poor quality scores, savings from great quality scores, and the net cost to your account.
This Is Probably True
The only caveat to these calculations is the little-known-fact that quality score IS NOT a number between 1 and 10. Google reports quality score to us mere mortal advertisers using that scale, but in the great AdWords super-computer a wider range of values is used – so your actual quality score may be 37 or even 68.2394. We don’t know the range of numbers they use, the number of digits of precision, nor the relationship of one score to another. And while this isn’t a secret truth, the fact is that I’m not much of a mathematician. So at the risk of public scrutiny and embarrasement, here’s the logic that lead to the above quality score impact calculations – feel free to issue corrections and admonishments in the comments: CPC is calculated by dividing the ad rank of the advertiser below you by the quality score of the advertising keyword. The table was created by calculating the difference between dividing X by 7 and dividing X by 8. This difference, it turns out, is consistent regardless of what X is equal to. Therefore, if quality scores were really whole numbers between 1 and 10, the chart above should be accurate. 
Since they’re not, we don’t know (at least I don’t) the impact of a different range of quality score numbers which act as divisors. If a perfect quality score is really 83 and not 10, and a very good quality score is really 64 and not 9, there would be a difference in the percentage impact to CPC of earning a perfect quality score versus and very good one. The assumption made in publishing these numbers as they are (which was disclosed) is that the real levels are proportionally similar. That could be wrong. Which means that the discounts and penalties on the extremes could be more or less. There is no way – short of a Google announcement – of knowing. I believe the numbers to be directionally true. Perhaps as Jim Sterne said about web analytics in general, they’re ‘true but not accurate’.
What Is True
The details probably don’t matter anyway. Quality score does in fact apply as a discount or a penalty to your CPCs. And whatever the numbers, the farther your quality score is from the mean, the more severe its impact. 
What matters is that we realize that high quality scores save us money (and get your ads shown more frequently and in higher positions) and that low quality scores cost us money (and result in less ad display and lower positions). In terms of data, everything after that are merely interesting. In terms of action, we need to use that knowledge to drive our actions. We want to be aware of our keyword quality scores, and manage them, based on the fact that they drive our placement and to a very large degree our costs. What Do You Think?
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Pam Neely
