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If you are a user of Google AdWords then you would have recently received an email from Google about some changes. In a nutshell they were:

What is changing:

- Simplified account management: Your keywords will be active or inactive - instead of normal, in trial, on hold, and disabled. In addition, accounts will no longer be slowed.

- Quality-based minimum bids: Soon, each keyword will be assigned a minimum bid based on its Quality Score. Keywords with a higher Quality Score will be given lower minimum bids to stay active and trigger ads. Keywords with a lower Quality Score (including those that are currently on hold) will have the opportunity to run if your keyword or Ad Group’s maximum cost-per-click (CPC) meets the minimum bid.

1. The Quality Score is determined by your keyword’s clickthrough rate (CTR), relevance of your ad text, historical keyword performance, and other relevancy factors.

2. Ad Rank, or the position of your ad, will continue to be based on the maximum CPC and quality (now called the Quality Score).

Of course this meant that guys like Perry Marshall that specialise in AdWords had to scramble with a response. This dramatic a change will require an update to Perry’s educational materials and no doubt he is already working on an updated version. He quickly sent out a letter to his subscriber base with the following comments about the changes to AdWords and explained the implications of the changes.

Perry Marshall: Over the weekend, the AdWords folks sent out a pretty important notice: The 0.5% Click Thru Rate minimum is effectively going away.

Also going away: the Normal - In Trial - On Hold - Disabled designations. Instead, they’ll either be Active or Inactive. And Google will simply tell you how much more you have to bid to become active.

This is going to do two things:

1) The immensely frustrating experience of losing your disabled keywords ‘forever’ will change. Instead of getting disabled, the minimum bid price will just go UP. So now you’ve got more than just 1000 impressions to get that pesky thing up and running. In fact, you’ve got as long as you need, IF you’re willing to pay, as long as you’re willing to pay.

2) It means that the difference between stupid advertisers, who have money and no brains - and smart advertisers, who use brains instead of brawn - that gap will grow even wider.

This has not yet been implemented, but will be implemented in the next few weeks. So, you ask, is this good, or is it bad?

Simple answer, it’s good if you’re smart and bad if you’re dumb. It also means you can make more mistakes and get away with them, IF you’re willing to pay.

It means a few other things, too:

3) The 0.5% minimum effectively is no more. You can show your ads at 0.1% CTR, if you’re willing to bid enough.

4) The Five Cent Minimum is going away too. You can pay as little as 1 cent, IF your CTR is high enough.

5) There are some categories where you can’t get a 0.5% minimum because you’re targeting a very unique kind of high value customer, different from the guy all the other advertisers are trying to reach. You may be willing to pay a lot for that visitor. If that’s you, this could open up some new opportunities.

How this *really* affects you depends on Google’s minimum threshold formula. (They’re not saying exactly how it works.) There’s all sorts of ways they can cook this thing, and we’ll just have to wait and see how things change. I’ll be watching closely; I’ve got a lot of campaigns that run at 5 cents, and I’ll be especially interested to see how it affects those.

This does put Google in a position of being able to slowly raise the minimum bids, without ever really telling you exactly what they’re up to.

Being that they’re a public company now, none of this is very surprising, is it?

Regardless of how the exact details play out, AdWords will continue to be a game where the dumb bloke who just walked in off the street pays through the nose… And the educated guys and gals get the sweet deals. The race goes to the swift - and to those who value education.

Well there you have it. That’s a pretty clear picture about how the changes will impact AdWords campaigns straight from the mouth of one of the experts in the field. The way I see it this is a winner for Google with more cash flowing in from stupid advertisers willing to spend a lot of cash on poor click through rates and high priced keywords. For the smarter AdWords users it gives you a little more room to experiment without experiencing immediate shut-down from Google.