Brad Geddes / PPC Geek
Official Google Ads Seminar Leader.
Author of Advanced Google AdWords.
Co-Founder, Adalysis.
(312) 884-9017
Brad Geddes's Theories on Marketing Bidding Into A Positive Spiral That Builds Long Time Savings

Bidding Into A Positive Spiral That Builds Long Time Savings

Let’s talk about bidding, and a strategy to aggressively compete for your keywords. Specifically, by bidding heavily out of the gate ads can be positioned highly, enjoy a higher click through rate, enabling a higher Quality Score. This is referred to as a “Positive Spiral” since a series of events are setup that enable future successes.

The bids are what they are based upon your Quality Score, level of competition, as well as the historical performance of the keyword across all past advertisers. The Quality Score, the only lever that can really affect it, is based upon the landing page relevancy to it & the speed it loads, the performance (CTR), and bids.

Budgets should not determine the bidding strategy. Instead budgets should be used to determine the scope. If, very budget conscious, go after very specific traffic, looking for pockets of highly qualified searches that also drive volume. This will enable advertising targets to grow and bootstrap future efforts.

The two scenarios below outline how initial bidding approaches can impact your account costs down the road.

Scenario 1: Nickel & Dime to the Top

Many times new advertisers will want to dip their toe in, and set low bids and see how they do. After doing a number of searches after it goes live (and probably not clicking on their ad) they start to wonder why they show up low or not at all. They then go back into AdWords and raise their bids, maybe from $0.15 to $0.25/click.

image

They do some more searches and see themselves more often, but still at the bottom of the page. So, they go back in and raise it to $0.30, a nice whole number. More searches, but the same story. So they go back and decide to get aggressive, $0.50 – a half dollar every time some clicks on their ad! They are now in the middle of the page and someone even saw them second one down on the right one time (Position 5). With a sense of accomplishment and an eye on their wallet, they relax; brew a cup of coffee, and move on to something else.

A couple hours later they go and check in and see a Below First Page Bid of $0.65 and shake their heads, curse greedy Google and set’s the bid. In a few minutes they see their ad showing up again and leave for the night. The next day another message: Below First Page Bid of $0.75, they see some activity over the night, so decide to raise it to $0.85, hopping over what Google suggests.

Later in the day, they see their average position of 4.8 and with the other metrics encouraging decide to get aggressive, $1.50. This sits for a day and their average position climbs up to 3.2; they do searches and see themselves in #2. They get a number of clicks, with an Average CPC of $0.90.

Then, just before they leave for the weekend they check in and see Below First Page Bid of $1.65. Now they are starting to feel gamed, but want to see what happens over the weekend, so they set it and let it simmer until Monday. Within the course of a week, a bid that started off at $0.15 had increased more than 10-fold! This is the quintessential “Negative Spiral” since the early bidding did not drive the performance that raises a Quality Score.

Scenario 2: Heavy Handed Leverage

The next week the advertiser’s leading competitor saw the new ads when they did searches and decided they had to get into the PPC game. They go after the same keywords, but take a different approach.

They see their competitor’s ads already listed so they want to blow them out of the water. They set $2.00 bids and immediately find their ads in the first two spots. Traffic is flowing and even though the bid is $2.00 they notice that click prices are much lower, around $1.00.

image

With the high position they enjoy high click through rates giving them a more favorable Quality Score (assuming their landing page’s speed and relevancy to their targets are equal to the competitor in the first scenario). Based upon the positive history that is being built up, bids can be lowered slightly, and over a period of time, the same position can be awarded.

Now, the Caveats

There is certainly a hard floor for each position, and bidding down too aggressively can and will probably see the position drop dramatically. The performance metrics are what drives all of the residual benefits, so if a lot of qualified traffic is attracted, be sure to convert them! Churning and burning is what Google expects with aggressive bidding and they will gladly raise the bids up if you are “wasting space” at the top of the results. This is an aggressive, but subtle tactic to maximize long term investment in proven search channels.

This is not the only bidding tactic that can be successful, and it is usually used after an account has aged for a bit and successful keywords or the potential for success is apparent. Optimizing downstream and will help reinforce the investment. I also suggest launching this in a new campaign, so some of the historical impacts can be limited.

If starting an account and want to find the early opportunities, I suggest reviewing the terms in the landing page title and header tags to convert them in to phrase match keywords. Create ads that highlight specific value props, setting the appropriate expectations. Bid moderately-aggressive and convert the terms to either modified broad match or exact (with appropriate ad group distribution) based up on the level of competition and quality of traffic. This will provide a good lay of the land.

If you have some successful bidding strategies, please share them in the comments.

Chris Kostecki is the Search Analyst at Keurig Inc. manufacturer of the revolutionary single cup coffee brewer, part of the Green Mountain Coffee family. All views he expresses are his own and do not necessarily  represent the views of any entities he is associated with. Follow Chris on Twitter to keep up with the latest trends in Search Marketing.


Opinions expressed in the article are those of the guest author and not necessarily Certified Knowledge. If you would like to write for Certified Knowledge, please let us know.

6 Comments

  1. gapup
    August 23, 2011 at 9:51 am · Reply

    Hi Chris, this is an interesting post.

    I had always been told that you didn’t necessarily need to worry about position as it relates to quality score because AdWords normalizes for position.

    Could you speak to this a bit?

    thanks!

  2. assemblelink
    August 23, 2011 at 12:50 pm · Reply

    Doesn’t AdWords take into account the ad position when it determines Quality Score and normalize it accordingly? If you were at ad position 5.5 and get a CTR% of 0.9%, it may be counted the same as if you were at ad position 1.0 and get a CTR% of 2.0% because you are expected to get a higher CTR% at the higher position.

  3. Chris
    August 23, 2011 at 2:45 pm · Reply

    Hi Chris,

    You bring up an old strategy that I think people should pay very close attention to because it works. Before anyone comes in to say that CTR is normalized by position and that the high CTR obtained from a higher position due to aggressive bidding has no effect on QS… they should try it first.

    Bidding aggressively on a keyword that you’ve just started using still works… and CTR normalization by position is not that accurate. Speaking from experience.

    With that said, aggressive bidding should never replace aggressive ad copy testing for higher CTR, better position and QS.

    If I may add a little tip to what you’ve shared, when reducing bids I like to reduce them to the amount of my av. CPC and keep doing it until I reach comfortable level.

    Thank you for writing the article.

    Chris

  4. James Svoboda
    August 24, 2011 at 7:49 am · Reply

    Oh man does this bring back memories! I use to do this with almost every campaign just trying to find that sweet spot of where we were conservative with early bids to shoot for projections and aggressive enough to gain exposure. With GoTo.com we would manually check competitors bids and shoot the gaps, then wait for them to change theirs (manually or through automated software) and then make our adjustments. A Spiral indeed!

    Now a days I plan for early bidding to be in the top 3 (in AdWords) to gain the access to Ad Extensions to obtain the CTR lift that this combination provided to increase QS and so on…

  5. alexe
    August 27, 2011 at 9:33 pm · Reply

    Hello Chris,

    Long time no see. I’d like to address the theory that ad position does not factor into QS calculation. I’m not going to say that CTR normalization by position isn’t happening. I just question the accuracy. So look at your data, what does it tell you?

    Our largest account contains A LOT of of active keywords. I ran a quick filter of keywords with avg. position worse than three and quality score of 8 or higher (on a scale anything above 7 is considered very good QS). My filter did not return a lot of keywords. There are of course other factors to QS, as Chris mentioned but the correlation is there.

    There are exceptions of course. They’re generally longer tail terms with low level of competition. That combined with an above avg. CTR can results in great QS.

    Great article, this still holds true and every paid search marketer should seriously take this into consideration.

    Thanks,
    Alex

  6. chriskos
    August 31, 2011 at 5:54 pm · Reply

    Hi Everyone,

    First, thank you for the feedback! This article posted while I was on the road and have not had a chance to check in on it (I blame Irene!).

    I have heard (mostly from Google reps) of position & CTR normalization for QS, but do not see this in practice. As we wade deeper into the muddied waters of what is supposed to happen and what is actually happening the speculation is going to increase. You’ve been warned 🙂

    One aspect that I tried to get through in the article is timing. The position one takes “out of the gate” matters and has consequences down the road. Normalization, by definition takes place over time. When/if normalization is taking place, it means they are incorporating a signal that the score is being throttled or being accelerated based upon that position. You still retain the leverage to a certain degree when you adjust your bids if that signal is being used.

    I should have probably mentioned something about normalization in the article and appreciate the opportunity to address it here.

    @Chris I have always been very subtle in lowering my bids, depending on volume, shedding pennies a day or week (the chart is a bit aggressive).

    @AlexE Great to hear from you! I agree with disparity between QS & position, while there are some, there are not many “very good QS” in the right rail or on page 2, and the ones that are have very low search volume.

    Thanks again for the feedback,
    Chris

Leave a Reply