The Complete AdWords Audit Part 13: Bid Management
“Great bids can’t fix a lousy campaign”
Whenever I think of bid management, I think of this quote from Craig Danuloff, back in 2010 in his excellent e-book ‘The 21 Secret Truths of High Resolution PPC’.
In the original e-book, Craig wrote the following about bid management:
“Bidding gets entirely too much attention in the paid search world. Both the idea of it and its process are treated as if they’re the central element to successful campaigns.
The truth is that bidding is just another piece of the puzzle. Even the best bid strategy or most powerful bid algorithm can’t overcome poor keyword selection, sloppy organization, or uninviting ad copy.
Think of it this way: there are pre-requisites for bidding. Until a keyword is ready, anything more than a simple target-position bid strategy is most likely a waste of time and perhaps money.
Don’t worry too much about the bid for any keyword until it:
- Lives in a tightly organized ad group
- Uses the right match type
- Attracts appropriate search queries
- Is paired with targeted and persuasive text ad copy
- Sends traffic to an effective landing page or conversion path
Any bids calculated and set before these milestones are achieved are based on inconsistent inputs, so they really can’t be accurate or optimal. Watch carefully and you’ll probably notice prematurely applied algorithmic bids that are too high, too low, or change radically from one period to another.
Garbage in, garbage out. As they say.
On the other hand, when the relationship between search queries, keywords, and text ads has been thoughtfully managed or optimized, smart bid strategies or advanced algorithms can be an incredibly effective way to maximize sales and revenues.
Spend a lot of time on bidding… after you’ve spent a lot of time on everything else.”
I believe all of the above is as true today as it was in 2010. Although I’d rather not suggest to spend a lot of time on bidding. Ideally, try to spend no more than 20% of your time and resources on bidding, and preferably a bit less.
I’m not saying bidding isn’t important, because it is. Your bids have a large influence on your position and CPC (as has Quality Score), which on their turn have a large influence on your CTR and ROI. So those are some good reasons to care about your bids.
On the other hand, there are 2 reasons why you don’t want to spend too much time on calculating and changing bids:
- Calculating bids is basically number-crunching, and as we know, with enough (predictable) data, software can do that better and faster than humans can.
- A new bid doesn’t give you a long-term advantage over your competition as they can easily change their bids as well.
What does give you a longer term and even unfair advantage is having higher Quality Scores and/or conversion rates than your competition. In that case you’ll be paying less for the same click while getting more in return.
So it’s best to avoid tinkering with your bids all day and focus more on creative and strategic work that can’t be automated instead. Especially if that work can lead to the unfair advantages of higher Quality Scores and conversion rates, like writing great ad copy and improving your landing pages.
In this series, I’ve tried to provide guidelines that are sensible for most AdWords accounts in most cases, so that readers can check their own accounts and implement whatever advice makes sense for them.
However, when it comes to answering the question: what’s the best way to manage my bids? The answer really is: it depends. So I can’t offer a one size fits all solution today, but the goal still is to provide best practices that are sensible for your specific situation.
That’s why the rest of this post is divided in the following parts:
- Before you start: profit-driven goals, optimal tracking and attribution.
- Setting bids for new keywords.
- Manual bidding with formula’s, filters, rules, scripts and the bid simulator. These methods are probably best for lower volume accounts or campaigns, generating less than 60 to 100 non-branded conversions a month, spending less than $10,000 a month or having no more than a few hundred keywords that matter.
It’s also the way to go if you want to keep full control of your bids, especially during sales or events like Black Friday, Cyber Monday, Super Bowl, Valentine’s Day, etc.
- Automated bidding with AdWords flexible bid strategies. This method is probably best for medium to high volume accounts or campaigns, generating more than 60 to 100 non-branded conversions a month. The more conversions you have, the better it works.
- Automated bidding with 3rd party technology. This method is probably best for high volume enterprise accounts, generating at least 500 non-branded conversions a month, spending $50,000 – $100,000 a month or more or having thousands of keywords that matter. It especially makes sense if you also advertise significantly outside of AdWords, e.g. on Bing, Yahoo!, Facebook or Display Networks outside the GDN.
This will make it the longest post in this series by far, which is ironic after downplaying the importance of bid management in the introduction. Nonetheless, it’s a complex subject with a lot of possibilities, so I hope you’ll bear with me and will find useful tips to apply to your campaigns and bids!
- Before you start: profit-driven goals, optimal tracking and attribution
Before you can even calculate bids, whether it’s manual or automated, you need to have the following in place:
- A profitable efficiency target like CPA or ROAS
- Tracking all conversions and/or value generated by your campaigns
You could have multiple CPA or ROAS targets in your account (e.g. because of different margins) and that’s perfectly fine.
You could also care more about clicks, position or visibility than about conversions or revenue, and that’s also fine (well… sort of).
However, this post will not go any deeper into awareness-based bidding besides mentioning the automated flexible bid strategies that can help you with that: maximize clicks, target search page location and target outranking share.
If you choose for any of these awareness-based strategies, please realize that conversion rates don’t vary (much) by position, and if they do, it’s more in favor of the 2nd and 3rd position (and not of the 1st position).
But it’s generally best to just bid based on value per click, improve your Quality Scores as much as you can and let the positions fall where they may.
It’s extremely important that your non-branded CPA or ROAS target takes the following into account:
- Your margin
- The part of this margin you’re willing to invest in acquisition
Based on these 2 inputs, you can easily calculate your target CPA or ROAS, as explained in the Goal Setting part of this series.
And to be truly profit-driven, you need to acknowledge the trade-off between volume and efficiency. This means you’re trying to find the target CPA or ROAS that maximizes your total profit in real Dollars, Euros, Pounds or whatever currency pays your bills.
Which isn’t the same as minimizing your CPA or maximizing your ROAS or ROI. Or as Google explains it in their Profit-Driven Marketing articles:
“Would you prefer an $80 CPA or a $90 CPA?
It’s actually a trick question, and the profit-driven marketer would say, “I don’t have enough information to choose between them.” Perhaps the $90 CPA lands your ad in the top spot on a search results page and brings way more sales volume than the lower-priced CPA unit. In that case, the correct decision is to spend more to make more.”
You can see the visualization of this example in the graph above. Obviously, if your current CPA target was $100 in this example, then the profit-driven thing to do was to lower it to $90. Somehow, Google forgot to mention that ;-).
The only way to find out your profit-maximizing target is to test with different CPA or ROAS targets (at least 20% to 30% higher or lower than your current target to make sure there’s a significant impact) and find out which combination of CPA or ROAS and conversions or revenue delivers you the most profit.
As mentioned in the Measurement part of this series, you should track the full value that your campaigns deliver, so all this value can be taken into account when setting bids:
- Obviously your macro conversions, typically leads or the revenue from sales
- Cross-device conversions, which usually means an uplift of 5% to 15% in conversions and can be integrated with flexible bid strategies
- The lifetime value of your customers
- The quality of your leads (if you’re lead-gen)
- Micro conversions, such as newsletter subscriptions
And if applicable to your business, you should also track the value of:
- Phone calls
- App downloads
- In-store visits
So if your goals and/or tracking aren’t optimal, it’s impossible for your bids to be. Being the 2 main inputs for any bid management, your goal setting and tracking need to be as accurate and complete as they can possibly be.
And then of course, there’s attribution. Most of us are still bidding based on last-click attribution, and that’s mainly because it’s hard to:
- Agree on an attribution model that isn’t last click.
- Manually adjust your bids and budgets based on this attribution model .
The very least you should do, is ignore the last branded click if this was preceded by a non-branded click, a so called ‘last touch with brains’ model. If you don’t do this and have a lot of branded conversions in your account, you’re probably undervaluing your non-branded keywords and campaigns.
Once you do that, it’s not a complete disaster if the rest of your keywords are judged mostly on their last-click performance.
As Siddharth Shah wrote a few years ago in his analysis ‘Attribution: Busting the Myths’: “In short, if you are doing search primarily, changing attribution rules usually doesn’t change much. You typically see a 10-20% assist funnels and 5-10% non-brand to brand type funnels. For the most part, you are fine working with the last click. However, when looking at multi-channel data, when search forms a small component of the overall picture, multi-event attribution can matter.”
This is also what other experts found when digging into to the attribution reports (formerly search funnels): only a small percentage of keywords can justify their existence based purely on assists. In other words: attribution is no excuse to keep ‘upper funnel keywords’ running that are highly inefficient. If you want awareness, effective display campaigns will offer you just that, at CPM’s that are hundreds of times lower.
Or as George Michie states in one of his comments in the Cardinal Sin of Paid Search: “paid search is a very expensive channel for brand building. If we think of an advertising impression being a visit to your website (I don’t think there’s much of an impression given by the little text ads), then a $0.50 click translates to a $500 CPM. That’s an awfully expensive way to show people you exist.”
And for those of us that would like to be more sophisticated when it comes to attribution, but don’t want to lose a lot of time recalculating bids, there’s good news.
In their livestream in May this year, Google announced that advertisers will be able to select an attribution model (including data-driven attribution) in AdWords and that automated bidding will then be based on the chosen model.
Watch the part from my fellow Dutchman Joan Arensman about making attribution actionable to see how this would work.
Let’s hope this will be released soon, because until then, the alternative is to do quite some manual work analyzing the attribution reports and trying to calculate bids based on your chosen attribution model.
- Setting bids for new keywords
If you just added a new keyword to your AdWords account, you may wonder what would be a good starting bid. As you have no click or conversion data yet, there are several options in this case:
- The estimates you get for that keyword from Google’s Keyword Planner
- Somewhere between the first page bid and the top of page bid estimate. But be careful: these estimates are often (way) too high when you just added a keyword. So wait at least a couple of hours (or days) before using these estimates.
- The expected value per click based on your expected conversion rate or revenue per click for that keyword. You’ll find the formulas to calculate the value per click below.
For more details about this topic, be sure to read Brad Geddes’ 4 Ways to Determine Your Starting Bids.
Depending on your budget, aim for an average position between 2 and 4 to start with, so you can accumulate the necessary data to refine your bids later on.
- Manual bidding with formula’s, filters, rules, scripts and the bid simulator
As stated in the beginning, manual bidding is best for lower volume accounts. For the purpose of this post, I’ll define lower volume as having less than 60 to 100 non-branded conversions a month. You’ll see why in the part about flexible bid strategies.
Manual bidding is fine for lower volume accounts because the time you need to calculate the right bids is limited and because you probably won’t benefit from the advantages of automated bidding, as automation works best with lots of (predictable) data.
Manual bidding can also be a (temporary) necessity during major sales, as algorithms will need at least a day (or more) to adjust to the effects of sudden spikes in volume, competition or conversion rates. That could mean the sale is already over once the bids have been adjusted to the right levels.
Value per click formula’s
Once a keyword has converted, you can easily calculate its value per click based on your target CPA or ROAS. Obviously, you’d rather have multiple conversions so your bids are based on solid data. Ideally, you’d calculate the bid based on the last 10 to 20 conversions.
For some keywords that means looking back 7 days and for other keywords you may need to look back 12 months.
The formulas to calculate the value per click of a keyword are as following:
For CPA targets:
(keyword conversion rate) x Target CPA
So if a keyword converts at 1.8% and your target CPA is $75, then the value per click of that keyword is 1.8% x $75 = $1.35.
This is the CPC you’re willing to pay to reach your target CPA with this keyword. You could bid a bit higher than this as your average CPC will be lower than your max CPC.
For ROAS targets:
(average revenue per click) / Target ROAS
So if the average revenue (or value) per click of a keyword is $8 and your target ROAS is 500%, then the value per click of that keyword is $8 / 5 = $1.60. Again, you could set you max CPC a bit higher than this amount.
To speed up your bidding based on one of these formula’s above you can make these changes with bulk uploads. Using this feature, you can:
- Download a spreadsheet with the right keyword data.
- Add a column in Excel that calculates the right bid by using the one of the formula’s above.
- Copy and paste the calculated value per click as values in the Max CPC column.
- Manually review the new max CPC’s, especially the extremes (highest and lowest max CPC’s): feel free to adjust these based on your own insights and CPC limits.
- Upload and apply the changes in AdWords.
I wrote a post 5 years ago specifically about this time saving feature in combination with AdWords Editor, you can read it over here for more detailed instructions: Align your bids with your CPA within 5 minutes using AdWords Editor and Excel.
Calculating bid adjustments
How to calculate your bid adjustments for mobile, locations and within ad scheduling has already been covered in the Campaign Settings & Bid Adjustments part of this series.
Nevertheless, it’s important enough to shortly recap and update this topic in this post.
First of all, the most important bid adjustment (that most people get wrong): the mobile bid adjustment. Google provides a clear formula and example in their Bid Like a Pro guide:
Why most people get this wrong, is because they don’t include the full value of mobile which can include more cross-device conversions, phone calls, in-store visits and app downloads. Google’s example clarifies this point:
Location and time bid adjustments are easier to calculate, by comparing the specific location or time efficiency with the campaign average.
I’d not recommend to compare it with the campaign goal (as Google does), as you’ll bid towards your goals at the keyword or ad group level, and bid adjustments are just a way of compensating for the deviation from the average.
For CPA targets:
- Location bid adjustment = (avg. campaign CPA / specific location CPA) – 1
- Time bid adjustment = (avg. campaign CPA / specific time or day CPA) – 1
For ROAS targets:
- Location bid adjustment = (specific location ROAS / avg. campaign ROAS) – 1
- Time bid adjustment = (specific time or day ROAS / avg. campaign ROAS) – 1
For more details about these calculations, check out How To Determine Your Mobile & Geo Bid Multipliers For Enhanced Campaigns by Benjamin Vigneron and the mentioned Bid Like a Pro guide from Google.
And remember: once you use the target CPA or target ROAS flexible bid strategy, you don’t need to apply these bid adjustments anymore in the selected campaigns, as these bid strategies will factor in real-time data on device, location and time to adjust bids. Any bid adjustments you may have will be overruled by these target CPA or ROAS flexible bid strategies, with the exception of a mobile bid adjustment of -100%.
Using filters and rules
Not all your keywords have conversions and even those that have may need a closer look after applying the formula’s above.
That’s where filters and rules come in. I mention these 2 together as rules are essentially filters with a specific evaluation period and action set attached to them.
There are many ways to filter your keywords and attach bid rules to them, but my favorite framework when it comes to keyword filters and bid rules has to be Chris Haleua’s 3×3 Performance Segments. In this framework, you start by dividing your keywords in 3 main segments:
- Keywords with conversions
- Keywords with clicks, but no conversions
- Keywords with impressions, but no clicks
You may also have (many) keywords without impressions because nobody is searching for them, and there is 1 simple rule for those: delete them. There’s even a script to help you do that. Or as Larry Kim said: Attention Keyword Hoarders: You Need to Delete 98% of Your AdWords Keywords.
Back to keywords with data: you complete the framework by applying the following sub-segments to the main segments above:
- Volume leaders: keywords with many conversions, clicks or impressions
- Efficiency threats: inefficient (too high CPA/CPC or too low ROAS) or low quality keywords
- Visibility Struggles: keywords in low positions
Once you combine these segments, you get a beautiful framework that can help you quickly zoom in and take action on the different kind of keywords. With filters and rules, we’re mostly interested in the outliers we need to take action on.
To get you started with the 3×3 performance framework (including the cool names for each segment) I’ve created the visuals below:
And to dive deeper into this framework and related materials, I’d highly recommend the following downloads from Chris Haleua:
- Note: These downloads have been taken offline.
With the last Excel download you can even create a fancy 3×3 performance segment bubble chart that will surely impress your boss or client:
Once you get familiar with a set of filters that work well for your account, you can set up automated rules whenever you find yourself taking the same action under the same circumstances. The Bid Rule Playbook and Template Library downloads above should give you more than enough inspiration to create your own rules.
Bidding with AdWords Scripts
Not every ‘if then’ rule you can think of, can be translated into an automated rule. Besides, automated rules can’t run more often than daily and can’t use data outside of AdWords.
This is where AdWords scripts come in. To give you an idea of the possibilities of scripts when it comes to bidding, I’ve assembled bidding related scripts from the resources below, where you’ll also find the instructions to implement these scripts.
You don’t need to be a coder to implement existing scripts, just read the instructions carefully and copy-paste in your own account.
For a good introduction to scripts, I’d recommend these 3 presentations at SlideShare:
- Introduction to Scripts by Amy Bishop
- A Three Man Approach to Mastering AdWords Scripts by Steve Hammer, Russell Savage, & Frederick Vallaeys
- AdWords Scripts: The Next Level of AdWords Optimization by Russell Savage
Google Developer Site:
Russell Savage, FreeAdWordsScripts.com:
- Unique Bidding Rules for Each Campaign
- Update Your Bids from a Google Spreadsheet
- Pull Stock Quotes into AdWords Scripts Using Yahoo! Finance API
Daniel Gilbert, Brainlabs:
Frederick Vallaeys, Optmyzr:
If you’re interested in many more scripts to automate more than just bids, you’ll find plenty of free scripts at these resources:
- RankHammer’s AdWords scripts compilation (over 140 scripts)
- Google Developers: AdWords Scripts Solutions
- Search Engine Land: AdWords Scripts articles
- Optmyzr Scripts
- Brainlabs: AdWords Scripts articles
- PPC Hero: AdWords Scripts articles
Bidding using the Bid Simulator:
For your highest volume keywords, you may want to check out the bid simulator data every once in a while, as it’s the only place where you’ll get an estimate of what you can expect at different bid levels.
This is based on the last 7 days of data (including Quality Scores, competition and search volume), but doesn’t necessarily predict the coming 7 days.
If you have no reason to believe the coming 7 days will be very different in terms of competition and search volume, it should give you a good estimate of what to expect for each bid.
Let’s use the screenshot below as an example:
For this keyword, we can calculate the following based on the bid simulator data above. If we would increase our bid from €0.25 to €0.50, this would lead to:
- An increase in average CPC from €0.15 to €0.30 (100%)
- An increase in clicks of 62%
- An increase in CTR from 1.59% to 1.71% (7.5%)
- An increase in cost of 214% to €3,490
- An increase in revenue of 60% to €10,100
- A decrease in ROAS from 568% to 289% (€10,100 / €3,490)
This can help us in selecting the optimal bid: would we rather keep the current revenue of €6,300 at a ROAS of 568% or would we rather increase our revenue to €10,100 but half our ROAS to 289%. Or any of the scenario’s in between?
Please note that you may not see the conversion and revenue estimates if there isn’t enough conversion data in your account. In that case you could multiply the click estimates with the expected conversion rate (and average order value) for that keyword yourself.
Also note that real profit maximization happens when you take incremental cost per click (ICC) into account instead of average CPC. For an introduction on this topic, watch the classic Google AdWords Bidding Tutorial by Hal Varian. If the second half of this video seems a bit puzzling, I’d highly recommend reading Averages Lie! Bid Simulator and Incremental Marketing by George Michie for a deeper understanding, thanks to banana stands (as there’s always money in the banana stand).
Combine your newfound ICC knowledge with the estimates from the bid simulator and Tenscores’ free Bid Optimizer tool and you can find the ultimate profit-maximizing bid!
Obviously, this whole process takes quite some time, so it’s mostly worthwhile for your highest volume keywords.
- Automated bidding with AdWords flexible bid strategies
I know, some people are fundamentally opposed to bid automation. And they especially have a hard time trusting Google to manage bids in the advertiser’s best interest.
But if they have thousands of keywords generating hundreds or more conversions a month, and they’re still bidding by hand, they’re missing opportunities.
Used correctly and under the right circumstances, AdWords flexible bid strategies can improve your results and save you lots of time when it comes to bidding. I’m talking about the target CPA and target ROAS strategies here as the other strategies are awareness-based.
You can use these strategies once the campaigns or ad groups you want to apply it to have received 15 conversions in the last 30 days. However, automated bidding works (much) better when you have more monthly conversions.
How many monthly conversions you ask? Well, Google has recently published conversion thresholds in their Setting Smarter Search Bids guide. This guide is a must read to fully understand how automated bidding works within AdWords.
And for the thresholds, I’ve summarized them in the table below:
As you can see, you need more monthly conversions for the target ROAS strategy and Google admits that target fluctuations and learning periods aren’t optimal below the 60 or 100 conversions a month.
If you’re below these thresholds, you could still benefit from Enhanced CPC (ECPC) and combine this with one or more of the manual solutions mentioned above. Or try your luck with target CPA or target ROAS, knowing it needs more learning time and target fluctuation is higher.
Once you’re above 100 non-branded conversions a month, it can work wonders and save you lots of time calculating and setting bids and bid adjustments.
There are 3 reasons why it can beat you at bidding, as you can read in the Setting Smarter Search bids guide:
- True auction-time bidding: bids are set and signals are evaluated for each individual auction.
- Adaptive learning at the query level: when keyword-level conversion data is scarce, it uses and learns from query-level data across your account.
- Richer user signals and cross-signal analysis: when determining bids, many contextual signals (like user location, browser, device, etc.) are evaluated, including how certain signals work together and influence conversion rate.
The picture below shows the signals AdWords evaluates when determining bids at auction-time:
So if you have enough recent conversions in your campaign(s), it’s definitely worth trying out the target CPA or ROAS flexible bid strategy.
However, always keep the following in mind when automating your bids:
- Keep monitoring your results and bids, especially when seasonality plays an important role. If you expect sudden changes on your website, your stock or external events that influence search or conversion behavior, it’s probably best to temporarily revert to manual bidding.
- Realize the algorithm needs to re-learn after every change you make in the selected campaigns or ad groups. So minimize changes if possible, but obviously make changes whenever necessary, like testing new ad copy and adding negative keywords.
- Read these 5 Reasons Why You Shouldn’t Entirely Automate Your PPC Bid Management by Andrew Lolk for more things to look out for when automating bids.
For more tips on how to best use flexible bid strategies, read 7 Advanced Tips To Automated Bidding Success On AdWords Search Ads by Matt Lawson and How To Resolve Issues With Flexible Bid Strategies In AdWords by Christi Olson.
- Automated bidding with 3rd party technology
If your account has more than 500 monthly non-branded conversions, and especially if you’re advertising on multiple search engines or channels as social media and display, then it’s definitely worth investigating a third-party bid management solution.
Such a platform could save you many hours and improve the performance of your campaigns at the same time by providing 1 interface to manage your bids, reports and attribution across channels and campaigns. Obviously, each platform has its own algorithms, rules and capabilities and it’s important to make sure you select the one that best matches your needs.
Below you’ll find a list of well-known platforms to manage your paid media. Most of these platforms are targeted to enterprise advertisers spending $50,000 – $100,000 a month or more on paid media.
However, a few also have solutions for mid-market advertisers (let’s say between $10,000 and $50,000 monthly ad spend), those are indicated with *).
Most of these of these platforms charge on a percentage of ad spend model, usually somewhere between 1% and 5%, with the percentage decreasing as the spend increases. Next to this, most of them also charge an initial setup fee.
- Acquisio *)
- Adobe Media Optimizer Premium & Standard *)
- DoubleClick Search
- Ignition One
- Marin Software *)
- Search Laboratory
If you’re considering to use one of these platforms, I’d highly recommend reading Enterprise Paid Media Campaign Management Platforms 2015: A Marketer’s Guide from Digital Marketing Depot. In here, you’ll find 50 pages of analysis and advice about these platforms that can help you select the one that’s best for your needs. Another highly useful paid resource is Econsultancy’s buyer’s guide for PPC Bid Management Technology 2015.
It’s important to realize that all these platforms evolve quickly, so their capabilities could have changed by now, compared to when these reports were released. So it’s always worthwhile to ask the platforms about their most current and upcoming capabilities.
There you have it! Probably the longest post ever written about AdWords bid management. I’m curious to hear your thoughts in the comments and hope you’ve found it well worth your time!
Bid Management: Your Audit Checklist
Have you ensured that the relationship between search queries, keywords, ads and landing pages have been thoughtfully managed and optimized, before investing heavily in bid management?
Do you bid towards a profit-driven efficiency target, based on the value per click?
Do you track all the value that your campaigns deliver?
For lower volume accounts and campaigns:
Do you make optimal use of bulk uploads, bid adjustments, filters, rules, scripts and the bid simulator?
For accounts or campaigns with more than 100 monthly non-branded conversions:
Have you tried the target CPA or target ROAS flexible bid strategies?
For advertisers with more than 500 monthly non-branded conversions that also advertise
significantly on other search engines, social media or display networks:
Do you work with one of the established third-party platforms?
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