Using AdWords Bidding Options to Spend PPC Dollars More Intelligently

The guide for what bidding options to use in your PPC campaigns is the same for any other option – your marketing goals.  What are you trying to accomplish with this campaign? Once you figure that out, then knowing the options available and which goals that fit well will help you more intelligently reach those goals.

Here are the bidding options and some guidance for using each:

1. Maximum CPC Bidding – If you are bidding for ROI or profit and/or want to use any of the advanced options in AdWords like Ad Scheduling or Position Preference, then you must use this option.  With this, you manually control your bids down to the keyword level in order to find the best bids for ROI or profit.

2. Budget Optimizer – With this option, Google attempts to maximize the number of clicks your campaign receives for your budget.  The thing is, Google will bid whatever it takes for that to happen.  Therefore, the system is automatically not taking into account the ROI or profit goals of your campaign. Therefore, if your campaign has keywords in it that have different values to your company, you should not use this option for that campaign.

If you are looking to maximize traffic to your site with no regard as to what keywords the traffic is coming on or the ROI/profit you are receiving, then this is the option you want.  A good application for this is if you have early buying funnel keywords that you want to advertise on, but don’t lead to conversions.  In this case, you would set aside a budget for branding purposes and use this option to get the most traffic possible for your budget.

AdWords gives you the choice of setting a max bid for this option, which you want to do.  Even though your focus is on traffic and not ROI/profit, you still don’t want to pay a click price that causes you to spew money.  You also don’t want a Budget Optimizer ad showing on a keyword that is in your Max CPC campaign, which will probably happen if you are using broad matched keywords.  So, set the max bid for this campaign lower than your Max CPC campaign bids.

3. Conversion Optimizer – With this option, you enter a cost per action (CPA) and AdWords automatically adjusts your bids based upon your ad group performance to try and reach that CPA.  This is good if you are mainly concerned about ROI as it controls how much you spend for a specific conversion so that you don’t have to.  The thing you want to monitor though is total profit.  You may be making the right amount of ROI for your goals, but sacrificing total profit to your company at the same time.

For a simple example, if your max CPA bid is $10 and that leads to 10 conversions at an average profit of $40, then you spend $100 to make $400.  But, it could be that if you raised your max CPA to $15 that it would lead to 20 conversions at an average profit of $40.  Then you would spend $300 to make $800.  In this first example, your ROI is 400% as compared to 267% in the second example.  But, in the first example you only profit $300 as compared to $500 in the second example.

Therefore, you want to test the max CPA if profit is your ultimate goal. BTW, you must have at least 15 conversions in the last 30 days to use this bidding option in any particular campaign.

4. CPM Bidding – “CPM” stands for “cost per thousand impressions.”  This option is for visual ads on the Content Network only.  This is because text ads are not easy to recall and therefore aren’t as good at bringing traffic back to your site that may have seen your ad on another website.    This option fits well if your goal is to increase the recognition of your brand and what you offer.  Therefore, you want the nature of your ad to not be as commercial, but to communicate that you have valuable information to share that will improve the user’s life.

The thing to be careful about here is having your ads show on sites where users are not being highly exposed to your ads.  Maybe your ad is showing below the fold and is still counting as an impression or users don’t spend much time on each page.  You definitely want to avoid these sites or at least pay less for them.

Hopefully, this overview gives you a good idea of what bidding options you should be using for your particular campaign goals.  Once you’ve decided on the bidding options to use, make sure you dive into getting to know them really well.  As with anything involving money, things can get a bit tricky.  But, if you learn how to use these options correctly, you will be on your way to spending your PPC dollars more intelligently.