The Art of Keyword Bidding

Estimated Reading Time 8 minutes

In today’s search marketing climate we can sometimes take pay per click (PPC) bid strategies for granted.

Advertisers and agencies all know it’s important, but often the simplest concept of a keyword bid and the actual CPC can be overlooked by auto optimising or accelerated bidding.

Back in the day, before Google AdWords existed, a little company called Goto.com created one of the first pay per click platforms for bidding on keywords. The beauty (and challenge) back then, was that you could see what other advertisers were bidding for their position and bid above or even tactically 1p below.

Goto then became Overture which is now part of Yahoo!

Overture LogoThe other platform within the competition was Espotting. Known as the cheaper cost per click (CPC) model and in some cases lower quality, Espotting, which later became Miva, was an excellent vehicle to drive traffic for inventory purposes.

Both Miva and Overture were all about the bids. You pay the highest, you rank the highest. The fun for the optimisers came when you had to get strategic with “killer bids” and “position 2” bidding, taking full advantage of bid gaps. It was aggressive, it was dirty and we loved it.

Miva Espotting

Google launched AdWords in 2000 and their twist on the PPC model (in 2002) was blind bidding! Yes, tell Google how much you are willing to pay with a max CPC bid and they would rank you against the competition without showing any bids. At the time, I remember my skeptical brain telling me Google could just manipulate this for their own benefit, although back then the competition for navigating the internet was huge. Competition included internet service providers like AOL and Tiscali, email providers like Lycos, and search engines like Altavista, Ask Jeeves to name a few. With this level of competition Google had to stick to its guns by delivering highly relevant results from a very clean white space search approach.google

Blind bidding was the key that helped Google to ensure the advertisers were highly relevant to the search terms they were bidding on. They had a qualification model built into their algorithm; the more relevant your ads and keywords were to your website, the higher on the listings you could appear for a lower bid price. This meant in order to get cheap clicks, you had to follow the rules. Prior to this model, anyone could appear at the top, bid the most and there you were. You could also keep a close eye on the price of competitors and strategically plan for how much you were willing to pay for which queries you wanted to appear for.

So how do we know what to bid?

In the same way the old bidding structure worked, we can now apply similar strategies. The goal is to make your keyword, ad and landing page as relevant as they can be so the only influence on ranking is your own CPC bid.

E.g.

Keyword: Car Insurance

Position 1 may cost the most per click but may also get you the most traffic and highest click through rate (CTR)

  • Good for high volume but potentially high cost and less relevant traffic clicking through

Position 2 may be more cost effective than position 1 but may get a lower CTR

  • Good for reducing cost, potentially drives more relevant clicks but possibly less of them

Position 3 will not always show at the top of the page, but often costs less

  • Good for reducing cost, however risky if you want to be appearing top of the page to gain impressions and click share over competitors

If I get an average of 1000 clicks per day for this keyword, by saving 1p on my bid for every click, I could save (or reinvest) £10 every day from just one keyword.

Simple right?

So let’s say that between 6am and 8am there is less competition for this one keyword, and core searches come from mobile. I choose to increase mobile bids to engage with more of the limited audience on mobile at this time of the day.

9am to 10am traffic dips slightly but conversions often increase – if I can convert at a higher rate and pay less then it’s win win allround. So I’ll keep my bids high even though traffic drops in a view to drive more conversions and higher ROI.

10am to 1pm sees a gradual increase over time in searches, lower conversion rate and higher CPC’s, what do you do? Reducing the bid would potentially lower the position and traffic, but sticking with high CPC’s in a lesser converting time means that ROI will fall and cost will increase. Remember £10 per day can be saved on one keyword by reducing your CPC by £0.01p. Your call, I know what I would do.

Bidding is so complex, the example above is for only one keyword. In the travel, property and ecommerce markets this becomes a huge challenge and hence a lot of automated bid strategies, which have often been set up and left to run. In a world where digital platforms and technology is changing so fast, we need to keep our strategies clear and relevant. Bidding on devices, at times of day based on actual user behavior rather than our assumptions of user behaviour can really make or break a campaign.

Rachel Mepham
Rachel Mepham has over 10 years’ experience in Digital Marketing and heads up the team at Digital Clarity. With a keen interest in up and coming digital platforms she has lead research projects to discover the best digital media tools available in the market. With a history in PPC since before Google AdWords existed you will often find her blogging about the challenges and solutions to optimising Pay Per Click Accounts. Follow @rachelmepham.
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