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New AdWords bidding tutorial
September 16, 2009
(Cross-posted from the
Inside AdWords Blog
)
Last month we launched a new feature of
AdWords
called
Bid Simulator
. Bid Simulator takes some of the guess work out of
cost per click
(CPC) bidding by estimating the number of clicks or impressions you could have received if you had used a different maximum CPC bid. Today, I thought I would take the opportunity to help you make the most of this new feature by explaining how to use the data from Bid Simulator to maximize the profit from your marketing investment.
In general, when you increase your maximum CPC bid for keywords on search you are able to generate more clicks to your site. This may be because your new bid qualifies you to appear higher up in the Sponsored Links on the search results page, or because your higher bid qualifies your ad to appear in new, more expensive auctions. The goal for you as an advertiser is to decide whether or not these additional clicks come at a cost that is still profitable for you.
To make this decision, you need to compare your expected
value per click
to your
incremental cost per click
. Your
value per click
is how much a click for a particular keyword is worth to you, on average. Your
incremental cost per click
is how much extra you are paying, on average, for the extra clicks you are getting from your higher bid. When your
value per click
is higher than your
incremental cost per click
it makes sense to increase your bid. On the other hand, if your
value per click
is lower than your
incremental cost per click
, you probably want to decrease your bid.
To learn more, you can watch the tutorial video below. In the video, I'll show you how to calculate these values, how to interpret them and how to use the data to maximize the profit from your marketing investment. My team and I are always looking for ways to help make the AdWords auction easier to understand so if you have other topics that you'd like us to address, please leave a comment on the video and we may be able to make it a topic for a future video.
Watch it on YouTube: http://www.youtube.com/watch?v=jRx7AMb6rZ0
Posted by Hal Varian, Chief Economist
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