Anyone who has spent anytime on this blog or read the documentation on our training site or who understands anything at all about how the alchemy behind AdWords works knows that Google decides where your ad appears on its SERP using an algorithm known as “Ad Rank”.

Ad Rank is calculated using your Max CPC bid multiplied by your Quality Score.

Or that’s how it use to work.

What you may not yet know is that Google is now also factoring in the expected impact from your ad extensions and formats or as one blogger put it “the more fancy features and ad formats you use, the better your Ad Rank is going to be”…assuming of course your max bids and your quality scores are high enough.

We posted a while back on ad extensions and you can read about those here: More Fun with AdWords Ad Extensions.

So how exactly does this work?

If two competing ads have the same bid and the same quality score, the ad with the more “expected” positive impact from extensions will be the one that grabs the higher position.

When determine which set of ad extensions will provide a better experience for the user, Google considers relevance, clickthrough rates, and “the prominence of the extensions or formats on the search results page”.

Google also decides for you which of these extensions are the most relevant to a searcher and will display those ad extensions.

From what Google tells us it appears that location extensions and sitelink extensions carry the most weight in this new equation; followed by social extensions (Google+). Somewhere in there your phone extension is also factored.

One thing is clear, not using extensions will hurt your ad rank.

So if you are still not using ad extensions for whatever reasons, now is the time to start!