Bidding
strategy for Google AdWords
Google says:
We use a rank number to help determine an ad's
position on a search results page. The higher the rank number, the higher
the position of the ad. This number is calculated in part by multiplying
your keyword's (or Ad Group's) maximum CPC (Cost per Click) times its CTR
(Click through Rate) on Google.com only, and factoring in the relevance of
your ad text. Each time your ad is shown, your ad's rank number is
recalculated.
So, leaving aside the 'relevance' factor, if 10
advertisers with no previous history launched a new product with the same
bid of £0.10 max and we assume a CTR of 10% , all would have the same rank
and it would be a matter of chance who appeared in what position.
But the following day the competitive situation would
change dramatically. Recent research in the USA has highlighted the
substantially higher click rates achieved by the top 3 ads, normally the
two appearing immediately above the natural listings and the top sponsored
ad on the right of the page. After 100 clicks results would be as
follows:
| Position |
CPC |
CTR |
Rank |
| Top 1 |
£0.10 |
4.6% |
4.6 |
| Top 2 |
£0.10 |
2.3% |
2.3 |
| Side 1 |
£0.10 |
1.2% |
1.2 |
| Side 2 |
£0.10 |
0.3% |
0.3 |
| Side 3 |
£0.10 |
0.3% |
0.3 |
| Side 4 |
£0.10 |
0.3% |
0.3 |
| Side 5 |
£0.10 |
0.3% |
0.3 |
| Side 6 |
£0.10 |
0.3% |
0.3 |
| Side 7 |
£0.10 |
0.3% |
0.3 |
| Side 8 |
£0.10 |
0.1% |
0.1 |
So Top 1 gets his rank confirmed simply because of the
benefit of the top position that has nothing to do with the quality or
cost of his ad. He can now reduce his maximum bid by up to 50% and
still keep his top ranking. Top 2 would have to more than double his bid
to win the top slot but could then maintain it with lower bids. But
side 5 would have to raise his bid to £1.60 or 160% before he would jump
to the top - after which he too could reduce substantially.
So what's to do?
1. Improve the quality of your ad and the selection of
keywords to achieve a higher CTR.
2. Bid high at first, then reduce to achieve maximum
benefit from the top ranks. Budgets can be protected by limiting
total spend so that sometimes your ad will not appear but the CTR is only
calculated when it does.
BUT before you rush to spend..... Google also says:
After determining the rank number, we calculate how
much the advertisers should be charged for a click on their ads by the
calculating the actual CPC. The actual CPC that each advertiser pays is
the minimum amount needed to maintain a rank number higher than the next
lower ad. To determine the actual CPC for an ad, we calculate the cost to
maintain the ad's position below it, and add £0.01.
So you think you can increase your bid without real
cost? The great way to stuff your competitor is to wait until he
puts his high bid in and then bid £0.01 less. That
will leave him paying the full amount and you paying only £0.01 more than
the low number 3.....until he decides to do the same to you.
Perhaps I'll play online poker!
Regards
Stephen Orr
stephen@web4marketing.co.uk |
