Ignore the Carrot at The End of That Stick: A Guide to PPC Bidding

By Tad Miller | Aug 19, 2009
More Articles by Tad


I recently wrote about, Google Adwords new Bid Simulator Tool being a “Carrot and Stick” motivator to get advertisers to raise bids.  The Bid Simulator Tool essentially tells you how many clicks and impressions you missed due to having too low of a Max Cost Per Click.  It’s good in theory but when you look at what kind of keywords you will be raising your bids on with Broad and Phrase match its not really all its cracked up to be.

But alas, thousands of Adwords advertisers will never see my post and will think the bid simulator is a great deal, and essentially bid with their ego to get the top advertising spot for their keyword.  Which will in turn have a ripple effect on other bids for the same keyword and lead to even more ego bidding to position.  In reality I think this tool isn’t Google being “transparent” into the ad auction.  It’s Google being a smart business and taking actions to increase ad revenues.

Another “tactic” employed to get advertisers to raise bids and cause the same ripple effect is the “Minimum First Page Bid”.  Google Explains the Minimum Bid:

This metric approximates the cost-per-click (CPC) bid needed for your ad to reach the first page of Google search results when a search query exactly matches your keyword. The estimate is based on the Quality Score and current advertiser competition for that keyword.

First page bids are an estimate of the cost-per-click (CPC) bid that it would take for your ad to reach the first page of Google search results when the search query exactly matches your keyword.

Minimum First Page Bid replaced the practice of making keywords “Inactive for Search” if minimum bid thresholds were not met.  So instead of the keyword going “Dark” your ad is supposed to show up on Page 2 of search results, which almost no one ever goes to.

The fact of the matter of “Minimum First Page Bids” is that it just doesn’t work that way in reality.  We constantly see keywords that have the “Below First Page Bid” notice in their status field, but their average Ad Position is ALWAYS in the top 10.

Example:

So it’s not really true that you will never appear in the top 10 ad positions for that keyword.  What is true is that your ad may not show in the top 10 for the overwhelming majority of the day for searches on these keywords. We aren’t alone in discovering this:

Of course, the knee-jerk reaction to this is raise the bid to make sure our ads are on the first page. However, we have learned to keep our knee in place, and stick to our maximum bid if it is below the suggested bid for first page placement. Curiously, we often discover that even though our bid is well below the suggested first page price, we still get clicks and the keyword reports show the average position in the top ten. Often the top 5-6, which is below our sweet spot of 3-5, but the cost savings and ROI of staying with our maximum bids exceeds the cost of raising the bid.

So how many impressions are you loosing by not meeting the first page bid threshold?  That’s an excellent question – but amazingly I don’t have a single keyword with a bid below the “Minimum First Page Bid” that has any interface with the new Keyword Bid Simulator to tell me how much I’m missing out on.  Coincidence, I don’t think so.

We don’t worry about ad positions because we bid to economics and results.  We know the bid price we can afford to meet our desired cost metrics, and if that bid is below what the search engine says the minimum is we don’t sweat it.

You should do the same.  Don’t be “Goosed” by the search engines into paying more than you should and don’t let bidding competition sway you into bidding irrationally either.

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