Advertisers that have done their own google adwords or have experience managing large accounts often ask us how conversion rates vary with position. Everyone is aware that higher positions tend to get more clicks and therefore more conversions in total. The question of interest is how does the conversion rate (conversions/clicks) vary with position?
This is a tricky question for several reasons. Since Google ranks ads by bid times ad quality, ads in higher positions tend to have higher quality and higher quality ads tend to have higher conversion rates. Thus you may see a correlation between auction position and conversion rates just due to this ad quality effect. However, the real question is how the conversion rate for the same ad would change if it were displayed in a different position.
Another difficulty is that the average position number reported by Google is that it is an average over all auctions in which you participate. If you increase your bid, it is quite possible to see your average position move lower on the page! The reason is that when you increase your bid, your ad will appear in new auctions, and it will tend to come in at the bottom of those new auctions. This effect can be large enough to push your overall average position down. See this FAQ for more on this issue.
We have used a statistical model to account for these effects and found that, on average, there is very little variation in conversion rates by position for the same ad. For example, for pages where 11 ads are shown the conversion rate varies by less than 5% across positions. In other words, an ad that had a 1.0% conversion rate in the best position, would have about a 0.95% conversion rate in the worst position, on average. Ads above the search results have a conversion rate within ±2% of right-hand side positions.
The bottom line: conversion rates don’t vary much by position.
Having the right algorithm in place, managing bids, and pushing down the average costs so you can generate more traffic and more conversions is key. Talk to Firefly to see how their optimisation and algorithm can enhance your campaign.
Reference: Dan Friedman, Inside AdWords crew