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I have an insatiable curiosity for exploring the way people behave. Lately, whenever I choose to spend some quiet time reading, I select a work of non-fiction that relates to investigating human behavior, philosophy, or probability. My most recent favorite, “Bozo Sapiens: Why to Err is Human,” written by mother and son pair Ellen and Michael Kaplan, has me thinking about some of the illogical ways people approach search engine marketing. The book’s main theme and tagline is that obvious logical errors are always the ones that other people make. For those of you managing adCenter accounts, I’d like to point out one of the biggest logical errors I continually see PPC managers make.
Over and over, I notice PPC managers approach their bidding strategy as if the search auction operates in a linear manner. The common belief holds that if I am an advertiser and I bid more than my competition, I should receive a better average position and capture more traffic, but it will be more expensive. In reality, things aren’t so simple. Let’s take a look at an example for the keyword “Flights.”
Based on Historical adCenter Spend
What do you notice? Contrary to the assumptions of many PPC managers, it’s often cheaper to bid more and maintain a higher average position. In the case of the keyword “Flights,” you can see that the advertisers in the Sidebar (SB) positions are paying higher CPC’s than those in the Mainline (ML) spots. Some advertisers are actually paying more for less!
Why does this happen?
adCenter favors advertisers with the most relevant ads and higher click-through-rates (CTR) weighted for position. Combining relevant ad copy with aggressive bids definitely pays off; after your ads prove to the system they are able to maintain a high CTR, the system makes it cheaper and cheaper for you to remain in a top position. Aggressive bids keep you in a top position, the top position yields more clicks, and more clicks lower the average cost-per-click. Bidding too conservatively creates the opposite effect; if your bids are too low, you aren’t placed in a position high enough to receive enough clicks to lower the average cost-per-click. In turn, you spend more and more money trying to fight your way back to the top positions.
As you prepare for the intense competition your business challengers are going to bring this upcoming holiday season, it may be worthwhile to examine your own approach to bidding. By locking in higher bids now, you can potentially save yourself some serious spend once the bidding wars heat up.
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Maybe some of those 'Bozo Sapiens' are finding better conversion rates with a lower listing. More qualified leads will often actively look beyond the top listing to find an ideal advertiser, whereas a top listing will produce many window shoppers. If you pay $1 a click in a top listing and get 30 clicks with 3 sales, or pay $1.40 a click for a lower listing with 15 clicks and still get 3 sales, you tell me which is the better bidding strategy.
@DK.
Thanks for your comment. You are absolutely right; each advertiser definitely has to find that sweet spot that works best. Often times, this can be in position 4+. I'm glad you bring up this point.
However, I have observed advertisers who bid too low right off the bat because of cost fears without really experimenting and "dialing in" the spot that works for them. What inevitably happens is that they realize they want a higher position and have to bid themselves out of the hole.
Cheers,
Michael
Great article, Mike. Can you comment on adCenter's ability to normalize CTR by position? If adCenter normalizes CTR, it shouldn't "reward position 1", unless the ad in position 1 really does get the best CTR of all ads. I see two possibilities if the ad in position 1 is being rewarded: 1) adCenter doesn't normalize CTR by position (or at least not very well), meaning there are advantages to aiming for top position to get high CTR, or 2) the ad in position 1 has landed there as a result of always having high CTR, which has moved the ad up the page while maintaining a low CPC. I'd love to hear your thoughts on these possibilities.
Thanks for this often overlooked bidding strategy - It will surely make MSFT shareholders all warm and fuzzy inside, and it is simple enough for even these 'Bozo Sapiens' clients of yours to apply. It raises one question, though: in Adcenter auctions, is the CTR component of the ad quality evaluation considered as a raw number, or is it normalized for position?
In other words, it should be expected from an ad in position 1 to have a higher CTR than an ad in position 5 - Is that expected gap taken into account when CTRs of different advertisers are compared, or are they compared without any adjustment based on their respective position?
Thanks,
Clement
Hi Michael
Thanks for the article.
You say "adCenter favors advertisers with great click-through-rates (CTR), and the best way to obtain a great click-through-rate is by bidding aggressively to land yourself in a top position. "
I'm surprised you recommend such a blunt instrument as being "the best". This used to be a tactic that worked within Google Adwords, too. However, my understanding is that Google has progressed to a system in which whether a CTR is "good" or not depends on a number of factors, including the ad's position. So (ignoring other factors) a 5% CTR in the #1 slot may be seen as "poor", leading to an ad being demoted, whereas that same 5% CTR in the #8 slot may be seen as "good", leading to an ad being promoted.
So now, the "best way to obtain a great click-through-rate" on Google is not to bid "aggressively to land yourself in a top position", of which there are few, but to target relevant keywords and write compelling ads that work in the spot you occupy. This is a strategy designed to maximise each SERP's overall CTR, and thus Google's revenues, whilst maintaining user experience/retention. Is this really not the case with adCenter?
Hi Michael,
if what you say is true, it means that AdCenter doesn't take the position into account to normalize the click through rate when calculating the quality score (which the user can't see anyway)??
I'd like to clarify my post a bit - adCenter does try to normalize CTR for position when ranking ads. Also, it is still very important to create top-quality, relevant ads. The spirit of the article is to dispel the belief that higher position = higher CPC's all of the time. In addition to selecting relevant keywords and writing great ads, it's important not to bid too conservatively. We all know position is important - even excellent ads are more likely to be ignored at the bottom of the page. If you bid well enough to get a great ad to the top, it could be cheaper to stay at the top.