The Subtle Science of Bidding

My recent SearchEngineLand “Analyze This” column, The Subtle Science of Bidding has caused quite a bit of industry discussion. http://searchengineland.com/the-subtle-science-of-bidding-part-1-the-real-story-44514  

In this first in a three part series, I examined Google’s AdWords data and came to the following conclusions:

Your bid is far more important than is generally thought. Not only does it determine your CPC, it determines the competitors of your auction marketplace and the number of impressions you will get.

Position is only an artifact of the auction. It doesn’t determine anything. Aside from brand considerations, don’t pay undue attention to it. Instead pay attention to bid, CPC, clicks and ROI. They are your true performance metrics.

Dramatic bid changes can adversely affect CTR estimates. As said, search engines make CTR estimates about your keywords as they move positions. These changes can really hurt your CPCs.

Number 1 isn’t always best. For brand keywords, if your strategy is to bid really high to position 1 and subsequently leaving the bid alone, you might be setting yourself up for disaster. Google will charge you a higher CPC but you will not get many more clicks in return. Hence, you must watch performance of all keywords even if you just want to get them to the top position only.

My next columns will expand on the final two conclusions with real life examples so stay tuned!

Dr. Sid Shah
Director, Business Analytics