Chapter 7: Budgets and Bidding

Chapter 7: Budgets and Bidding

Understanding Bidding Basics

Before getting started with AdWords, you need to have a clear goal in mind. You'll need to decide if you want to focus on clicks, impressions, or conversions.

Traffic Goals

You should focus on clicks when you just want people to visit your website. Therefore, the best bidding model for tracking traffic to your site is CPC bidding.

With CPC bidding you'll pay when people click on your ad (which will direct them to your website).

With this bidding model you have two choices; automatic bidding or manual bidding. With automatic bidding all you need is to set your daily budget and AdWords automatically adjusts your CPC bids to give you the most clicks for  your budget. With manual bidding you set bids for specific keywords.

Branding Goals

You should focus on impressions when you just want to get your brand out in front of as many people as possible, and not necessarily drive traffic or conversions. Image and multimedia formats are best for increasing brand awareness because the message is in the ad itself so you don't need people to click through to your site.

The best bidding model for impressions is to use CPM bidding where you'll pay for every 1,000 times your ad is shown.

CPM bidding is only available for 'Display Network only - All features' and 'Display Network only - remarketing'. CPC is also available for Display Network ads.

If you don't see the CPM option available on your campaign, it's likely because you're only opted into the Search Network and not the Display Network. CPM is not available on the Search Network.

You can set bids at the ad group level or for specific placements.

Conversion Goals

Focus on conversions if you want to track how well your ads result in viewers taking a direct action on your site. These actions may include signing up to a newsletter or completing a purchase. You need a single well defined conversion type and the ability to place code on your thank-you page (which is usually possible for any set up).

The thank-you page is the page that a user is redirected to immediately after purchasing or signing up to an email newsletter.  AdWords will give you the code to place on your web page.

The best bid model to use for tracking conversions is the CPA model (although you can also use CPC). With the CPA bid model you tell AdWords the amount you'll pay for a conversion. You have to be using conversion tracking in order to use this bid model and you need to have at least 15 conversions in the last 30 days.  This is necessary so AdWords can make a good prediction about your future conversion rate.

This model can be used for the Search Network or the Display Network.  If you don't meet the criteria for the CPA model (or don't want to use it), you can use the CPC model and track your conversions with conversion tracking.

You have the ability to change your bidding options at any time through the campaign settings tab by clicking edit next to the bidding option, and save your new option.

Adjust Keyword Bids

Manual bidding is the default CPC option. That's where you control the bid down to the keyword. You may change your bid amount at any time for any of your keywords.

You can do this by navigating to the campaign tab. From there click on the keywords tab and in the max. CPC column, click the bid you want to change. Enter a new bid amount.

AdWords suggests starting with a maximum CPC bid of $1 and see where that gets you (in some markets this won't get you very far). Your ad position is dependent on the other advertisers bidding on your keywords.

Keep in mind if you've set a maximum CPC bid of $1 and the next most competitive bid is only 0.70 for the same ad position, then your actual CPC will be 0.71. You are only charged what it takes to beat the next lowest bidder.

You can always switch from manual to automatic bidding at any time and AdWords will figure out the optimal bids for you based on your daily budget and your CTRs.

AdWords Tools

AdWords has a few tools to help you manage and optimize your bids. The Traffic Estimator shows how often keywords are searched along with the cost estimates for them.

The opportunities tab will give you suggestions for increasing and decreasing your keyword bids to help you maximize your campaign.

The bid simulator estimates what happens when you change your bids.

Enhanced CPC (ECPC) looks for ad auctions that may lead to more sales and raises your CPC bid up to 30% more. It lowers your bid on auctions that don't lead to more sales.

Two more tools will help you find the keyword bids for first page ad position and for top of the page ad position.  First page bid estimates show you the estimated CPC bid for your ad to reach the first page of Google. That way you can see what it takes up front to be a contender for a position on page one.

You can also learn more about the top of page bid estimates. This tool will show you an estimated CPC bid needed for your ad to appear at the top, above the first page of Google search results. Again, this will help you decide if you can compete at that position.

And lastly, conversion tracking (if you decide to use it) shows you which keywords lead visitors to take the actions you're tracking. This is great if you have a direct response website set up and define the goals you'd like your visitors to take.

Display Network Bids

You'll typically experience lower CTRs on the Display Network. This only makes sense as it's harder to get a viewers attention when they're not necessarily searching for the product or service you're advertising for.  Instead, viewers on the Display Network are checking out websites like YouTube, niche sites, or blogs.  So you'll have to fight harder to get noticed.

Therefore, you may want to have a separate CPC bid just for the clicks you generate on the Display Network.  These will usually be lower than the CPC bids you set on the Search Network.

You can use your keyword bid for both the Google Search and Display Network if you have a single campaign targeting both.  Or you can set a Display Network bid that will override all keyword bids for the Display Network.

If your campaign targets both the Search and Display Networks, you can set your own Display Network bid by clicking the campaign name, click the ad groups tab, find Display Network max CPC, click on the bid, and type in your new bid (take off auto if it's on auto by editing your bidding and budget settings).

If your campaign only targets the Display Network, you can set ad group bids for all your keywords and placements. If you use Display Network bids, they'll override any of the individual keyword level bids. It's best to set bids for your keywords based on how they're performing if you can manage your ad groups at this level.

Once you choose an initial bid for the Display Network, wait a few days to check on the results. You can do this in the 'all campaigns' view and find the 'totals' row for the Display Network.  From there you can monitor impressions, clicks, and conversions (it's suggested that you have conversion tracking enabled).

As a side note, adding placements to an ad group does not affect the quality score for the Search Network. Your ads in the Display Network do not affect your rank for search ads.

Bidding Strategies

It's always a smart move to figure out how much your keywords cost and compare that to how much revenue they're bringing in. AdWords can measure this for you if you have conversion tracking set up. If you measure this then you can change your bids around in order to maximize your ROI.

If your campaign meets its daily budget on most days, then you know you're missing out on impressions. If you're running a profitable campaign, then it may make sense to increase your daily budget. You may end up earning more money just by doing that.

If you notice keywords that generate a lot of impressions, but very few conversions, you may want to delete those keywords.

If you're using the CPC model, you'll want to let your bids run over time and then review how they're doing.  You can also use the Bid Simulator to see what might happen if you adjust your bids.  If you're not on the first page then the first page estimates can help you figure out what it will take to get there. 

In order to reach and maintain the top position in the paid search results, you will need to increase your Quality Score and possibly set a higher maximum CPC.

Experimenting and Evaluation

Every time you change a bid you should look at the results. AdWords suggests you change your maximum CPC amounts in small increments. When you change the maximum CPC bids, check the amount of clicks you're now getting and if they lead to real results in your business.  Figure out how profitable your keywords are with current CPC bids, then change them and see how profitable they are after the changes. You can always put the bids back.

For keywords that convert well, you can try increasing their maximum CPC. This can result in an increase of the keywords position that may increase your ROI. For keywords with low conversions, lower the maximum CPC which will lower the cost of those low performing keywords. You can even delete keywords that aren't performing for you at all.

Bidding Recommendations

For the Search Network, as you increase your bids, your ads will move to a higher position on the search results pages. As you lower your bids they will get a lower position. 

For the Display Network you can set a maximum bid for all automatic placements. That way you're never charged more than your maximum bid.  For managed placements, you can set different bids for different sites depending on their performance.  For the placements that perform well, you may want to raise the bid and see if you're still profitable.

Enhanced Cost-Per-Click (ECPC)

The Enhanced cost-per-click (ECPC) bidding feature raises the bid for clicks that are most likely to result in a conversion. It will raise your max CPC bid up to 30% more than what you set it at. ECPC lowers bids for auctions that don't lead to conversions.

You must have conversion tracking turned on in order to use ECPC. You can turn it on by going to the campaign settings, find the bidding and budget section, click edit next to bidding options, find enhanced CPC and check the box reading, 'use my conversion tracking data and bids to optimize for conversions'. Clicking on this automatically sets your ad rotation settings to 'optimize for conversions'. Nothing will happen if you change these settings and you don't have conversion tracking set on.

Differences Between ECPC and Conversion Optimizer

Both ECPC and conversion optimizer work to get you more conversions.  The differences are:

• ECPC works with all campaign settings and max CPC bids and can raise them by 30%. It works with third party bidding systems and without conversion tracking turned on ECPC will not do anything.
• Conversion optimizer lets you set a target CPA or max CPA. It automatically sets your CPC bid for each auction and it may not work with some API based bid management solutions.

ECPC works with the max CPC bid you set, and it will only go up to 30% over it.  Conversion optimizer works with a CPA bid, not CPC.  Conversion optimizer gives you the best chance to improve your bidding.

They both use conversion tracking or Google Analytics to predict a conversion rate and adjust bids to help you improve your ROI.

Cost-Per-Thousand-Impressions (CPM) Bidding

If your main goal is for people to see your ad, but you don't care about clicks or conversions, then CPM is the best bidding model to accomplish your goal. You can use CPM on the Display Network (it is not activated on the Search Network).

You can set a maximum CPM and similar to CPC bidding you'll only pay what you need to rank higher than the advertiser right below you.  If you're bidding against a CPC advertiser for the same spot and you're using CPM, AdWords will estimate how many clicks the ad might receive in 1000 impressions to compare with the CPM ad. Using this estimate they will determine who the higher bidder is.

One advantage of CPM ads include that they are usually given the entire ad space. Even text ads using the CPM bidding model will not share the ad space with other text ads. 

Daily Budgets

Your daily cost can be up to 20% more than your daily budget. This 'over delivery' can happen on days with higher search traffic. The total for the month will not go over the charging limit which is 30.4 times your daily budget.

If your daily budget is the same value throughout a month and you spend more costs in a month than your monthly limit allows, you'll only be charged your monthly limit.

There are many ways you can avoid depleting your daily budget to ensure your ads are seen throughout an entire day.  Here are your options:

• Lower your bids for campaigns that are limited by budget.
• Let AdWords automatically bid for you to get as many clicks as possible.
• Choose standard delivery for your ads.
• Look at the recommended budget and see how you can improve your performance with a different budget.

Ad Quality

Since AdWords takes ad quality into consideration and rewards ads that are more relevant, more relevant ads will end up with more clicks for less cost.

For the organic search results, relevance is determined by many factors. For AdWords ads, the ad quality or relevance is the most important factor. AdWords measures this through your Quality Score.

Quality Score is an estimate of how relevant your ads, keywords, and landing page are to a viewer seeing your ad.  The higher the Quality Score the more they think it's relevant and useful.

For example, AdWords provides an example of how you might not want to target just socks, but stripped socks and how your ad, landing page, and keywords can all target stripped socks specifically.

Checking Your Quality Score

You can check your Quality Score within your keywords tab.

Click the campaigns tab at the top, select the keywords tab, click the white speech bubble next to any keywords status and you'll see details about the Quality Score.  You'll be able to see ratings for expected CTR, ad relevance, and landing page experience.

Another way to check on your Quality Score is to enable the Quality Score column in your reports.

Quality scores go from 1 to 10 (10 is the highest). Your ad's Quality Score is recalculated every time your ad is eligible for an ad auction. That means every time someone does a search that triggers your ad, your Quality Score is calculated.

Factors used to establish your ad's Quality Score include:

• Keywords
• Past CTR
• Display URL's
• Past CTR
• Account history
• Quality of landing page (i.e. easy to navigate)
• Keyword/ad relevance
• Keyword/search relevance
• Geographic performance
• Ads performance on a site
• Targeted devices (you get different quality score for different types of devices)

Your Quality Score impacts the following:

• Ad auction eligibility
• Keywords CPC
• Keywords first page bid estimates
• Keywords top of page bid estimate
• Ad position

The higher your Quality Score, the better ad positions you can get and lower costs you have. It's possible to increase the Quality Score of a keyword by directing the ad to a more relevant landing page.

Landing Pages

AdWords measures your landing page by how good they think a user's experience will be when they land on it.

Here's a list of factors you can use to improve your landing pages:

• Provide relevant, useful, original content.
• Promote transparency and trustworthiness on your site.
• Make it easy for customers to navigate your site (on mobile sites too).

If you want, you can prevent AdWords from checking your landing page by setting your robots.txt. However, this may result in a big drop to your Quality Score.

You can check the Quality Score of your landing page by going to the keywords tab and placing your cursor over the speech bubble next to the status of any keyword.  There are three ratings for landing pages; above average, average, or below average.

If you change your landing page, you can see results within days or weeks.

You can also see 'not applicable' instead of a rating. In that instance your landing page is in violation of their terms (i.e. it contains malware) and it is not rated. You'll have to fix the problem with your landing page in order to get a Quality Score and start sending traffic to your page through AdWords.