Adwords Bidding Strategy

January 5th, 2012 by admin Leave a reply »

google adwordsStart off bidding high while you’re gathering data and just to get the ball rolling. Always pay closest attention to which adcopy converts best in your testing phase.

Then lower your CPC bid every other day or so until your position starts suffering. If you don’t lower your bids over time, which is most beginner PPC advertisers, then you’re overpaying for clicks plain and simple.

A hypothetical example

You start your campaign and you’re bidding $3/click, but your clicks are actually costing you $2.32. After a day or two, you lower your CPC bid to $2.30 (a couple ¢ under what you’re paying) and then wait for some more traffic to flow. Then check on it a day or two later. Now you may see that your clicks are actually costing you $1.83, so you then lower your CPC bid to $1.81.

When you keep repeating this process of lowering your bids over time, at some point you’ll reach the lower bid floor and your position will start suffering. Obviously you don’t want to trade cheap clicks for shitty position, so raise your bid a little bit until you find a happy balance between position and CPC price.

Update:

I decided to update this post real quick and try to explain the “reason why” a little bit more thoroughly. I always seem to hit the publish button a little too soon :)

CTR matters to Google because that is what makes them money. They want to put the ads that make the most money in the best positions, obviously. If your ad has the highest CTR, you’re able to pay a lower CPC than all your competitors if your CTR makes up for it. Consider this scenario…

You are paying $0.20/click and have a 8% CTR. With that math, we can deduce that Google will make $16 per 1,000 impressions of your ad (CPM).

1000 imp X 0.08 = 80 clicks
80 clicks X $0.20 = $16 CPM

Now let’s say your next best competitor is getting a 5% CTR and is paying $0.30/click

1000 imp X 0.05 = 50 clicks
50 clicks X $0.30 = $15 CPM

As you can see, Google would give your ad a better position even though competitor #2 is paying a higher CPC than you. Competitor #2 would have to raise their bid or increase their CTR to beat you.

The most IDEAL situation is when your best converting ad is also the one with the highest CTR, but that is usually not the case. Usually, your best performing ad is NOT the one with the highest CTR.

4 comments

  1. Andre says:

    THIS is why this is my favorite blog. All the other affiliate blogs are nothing but filler content most of the time

    • admin says:

      Thanks! It IS a super secretive industry. But I’m not secretive! You just simply can’t get all the internet traffic out there and I enjoy talking about it and improving my writing

  2. James says:

    Super informative post. I’ve kind of came upon the same conclusion recently through trial and error.

    A couple questions. Do you know why dropping the bid over time works best as opposed to running say 50 clicks to a new campaign then lowering the bid that same day? Any reasoning why as to why that works better? Have you nailed the best time frame down to a couple days?

    I’ve found that lowering the bid too fast will cause you to limit your impressions. Even if your bid is way above the top page bid estimate, lowering right away doesn’t usually work and will kill your traffic. I’m still trying to find the sweet spot though, its taking a lot of trial and error.

    • admin says:

      Hey James, I don’t really have an answer for that. The only thing I can think of is that it takes time and some click data for the Adwords algorithm to draw conclusions from your different bids. Who knows, maybe their algorithm looks at daily performance – if you let a bid run for an entire 24 hours the computer has something to compare it to when you lower your bid on day 2. At the end of the day, everything is much more controlled when you don’t lower/raise your bids too frequently, and the data you get on your campaign will be easier to read.

      In an ideal world, I’d like to bid for the top spots as long as it takes for me to figure out which ad and landing page combo performs the best, and THEN lower my bids to find that basement price (because then my margins will increase as my cost plummets). In the real world though, we are dealing with thousands of keywords, low volume keywords, failed tests, etc… so I’d focus mostly on your bread and butter keywords and don’t try to lower bids daily on a keyword that only contributes 1 sale per year.

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