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Previously ad formats were based on a complicated and confusing algorithm, but Google has done away with that and replaced it with a simpler rule: the better your ad ranks, the better ad format it gets.
Essentially, ad extensions now work like an inverted pyramid, where the top ad can display a full extension, the next ad slightly less and the next even less than that.
See the below example:
Search: Sydney IT company
The competition for top spots is likely to become stiffer now that it comes with this added benefit, which means a higher cost per click (CPC).
If you do score a top position you’re able to display more information than your underlings, which is likely to result in a higher click through rate (CTR).
You can no longer rely on your extensions to get you those extra clicks if you’re not in a top spot. You’ll have to make sure your ad copy is strong enough to bridge the gap.
1) To combat the increased CPC you’ll need to focus on improving your Quality Score. This is yet another reason to focus on upgrading your ad copy and polishing your landing pages until they squeak and sparkle.
2) If you’re sitting pretty you’ve now got even more of an edge. Be sure to have your ad extensions enabled to capitalise on your new advantage.
3) Be aware of any fluctuations in CTR in the next few weeks. While we don’t predict any earth shattering changes, it’s worth staying vigilant to determine just how much your reduced extensions affect you.