One of the biggest decisions a marketer must make with Google Ads is how much to bid on a keyword.
Or to rely on a Google Ads automated bid.
Most businesses have a set budget they want to spend on pay per click and a list of keywords they want to target. The objective is to get the most out of their budget.
Most likely that comes down to how much you bid on your keywords.
First, you have to understand bidding in Google Ads.
In some respects, it's similar to how you would bid on eBay.
When you put in a bid on eBay, it is the most you’re willing to pay for that item.
With eBay your successful bid will be a penny higher than what your next competitor is willing to pay.
For Google Ads, it's almost the same thing. If you bid 5.00 and your competitor bids 4, then the most you pay is 4.01.
Your bid is only part of the equation.
The difference with Google Ads is that you don't have to be the highest bidder to win.
Your bid might also be ignored, even if you're the highest bid.
That’s because your bid is based on your AdRank.
AdRank is your bid times your Quality Score.
If your Quality Score is low, your bid might be overtaken by a competitor bidding lower.
And depending on the type of bid you make; your actual bid might be much higher than the actual amount you placed.
Confused? You should be.
If you want to succeed with Google Ads you have to understand the bidding process. So that your ads appear regularly for your targeted keywords.
Here are some things to consider before bidding on a keyword.
Choosing a Bidding Option – Automated Bidding Vs. Manual
When setting up a campaign you’ll be given a lot of options to choose from for bidding. None of which are manual.
Google obviously pushes hard for marketers to use an automated system, but that isn’t always the best option for a business.
Especially in the beginning, when you have no data with which Google can work with.
Let’s review the options Google presents you.
The options have become fewer as Target CPA and Target ROAS will soon be discontinued. It’s why you don’t see them on the initial list of options.
Maximize Clicks means that you want to get the most clicks for a keyword.
This is a good idea on the face of it. Particularly if you have a short list of keywords and not using broad match.
The problem arises if you have an extensive list or using the wrong keyword match type.
It’s also problematic if not all your keywords have the same value to your business.
Google’s system goes after the cheapest keywords to get you the most clicks. The reason they’re often cheaper is that they don’t often convert.
The result is quantity over quality. You pay less for your words, but more for your conversions overall.
Target Impression Share actually is three different options disguised as one.
You can decide to show your ad on the absolute top of the page, on the top of the page, or anywhere on the page of Google search results.
To ensure you don't overspend on this strategy you set a maximum cost per click.
You also set a percentage for how much you want to show for the option you choose.
My concern with this strategy is that it's better for branding as your ad shows a lot, but it’s not based on profitability.
Showing up as the number one ad means nothing if your phrases aren't converting. Paying more for a top spot means fewer clicks overall from your monthly budget.
The ultimate winner with this strategy is Google as the system tends to drive up bids for you and your competitors.
Maximize Conversions means you want as many conversions for your daily budget as possible.
This is another option that on the face of it seems like a good idea. Who wouldn’t want as many conversions as they can get?
As with the previous option, this can only be effective if you’re tracking most, if not all, your conversions.
Google’s automated program finds an optimal bid for your ad each time it's eligible to appear, based on various signals associated with the searcher.
The problem I see with this option is that often your cost per conversion is higher than it should be.
If there hasn't been a conversion on a particular day, then the system tends to overbid to compensate.
Maximize Conversion Value is what is ultimately taking the place of the more familiar Target CPA. As well as ROAS.
This only works if you can assign a value to each of your conversions and are able to track your revenue.
Given its name you would think it would target the products or services that have the highest value. This isn’t necessarily the case. If Google finds cheaper products result in more frequent sales, they go after these instead.
With the right criteria in place, this can be a very effective option. Particularly if you have a very high budget.
Where it struggles is if your conversions being tracked are limited or your budget is limited.
The other two automated options are a little more difficult to find as Google prepares to sunset them. They can be found the same way in which I relate to manual CPC.
Target CPA or Target Cost Per Acquisition In this, you set the amount you want to pay for a conversion.
Let’s say the most you can make off of a product is when it costs 4 dollars to acquire a lead.
Using your historical data and information they develop about a searcher, they will adjust your bid so that on average your cost per acquisition will be close to your number.
Yet, this can only work if you’ve been running ads for a while and have historical data that shows how much it currently costs for you to get a conversion.
They suggest you have at least 15 conversions over the last 30 days, but I'd recommend using it only if you have more than this. I'd suggest using this criteria for most of the strategies.
This is why it's critical that you have conversions set up correctly.
It's also important to realize that you just can't put in any number and expect Google to reach it. They'll suggest an amount and its good to begin close to that. Even then there is no guarantee the amount will be reached.
Target ROAS helps you get more business with return-on-ad-spend you.
It’s a ratio percentage in which you tell Google you want to get this much back based on your spend. Say you want to get 5 dollars for every 1 dollar you spend.
You have to be realistic about your ROAS. It’s not a magic pill in that you can choose any amount and it will work.
This works best for eCommerce businesses.
Google adjusts your bid based on its potential to bring in revenue.
This is a strategy you can’t start out with.
To use Target ROAS bidding, your campaign must have at least 15 conversions in the past 30 days at a minimum. The ideal number of conversions in that period, however, is 50.
As you can see, most of these automated systems only work if you have historical data that Google can use to determine which searchers have the most potential for becoming leads for your business.
If you start off with many of these automated systems without having the benefit of historical data, you'll likely overpay for words that don’t even convert.
It should be noted that Google has recently announced that Target CPA and Target ROAS will soon be discontinued.
How To Locate & Choose Manual Bidding
You might have noticed that manual bidding is conspicuously absent from your initial choices. As are Target CPA and Target ROAS.
To locate any of these options you need to look at the bottom of the panel for bidding. There you'll see Or, select a bid strategy directly (not recommended).
Click on that and you'll provided with a list of all the bidding options.
Manual Clicks means you set the amount your most willing to bid.
You can set the amount your most willing to bid at the ad group level or for each individual keyword.
This is the way AdWords started, but over the years, Google has been turning more and more to machine learning to improve results for marketers.
Enhanced CPA works in conjunction with manual clicks. It’s another way Google sneaks in automated bidding.
You set a bid, but Google will raise it based on the projection that the searcher is more likely to convert.
This bidding option can work, but again you have to let your campaign run for a while before using this. Otherwise, Google will implement it too soon and as a result does not work for you.
Why Choose Manual Bidding
Despite their proclamations, manual bidding is a very effective method. Especially in the beginning.
Google’s automated systems only work effectively if you have data.
With a new campaign, even one that tracks most conversions, there is no data to begin with.
It’s best to begin with manual CPC for a month to get Google the data it so critically needs. Then switch to an automated bid.
If you’re like many businesses, especially those in the service industry, you’re not tracking many of your conversions. This severely limits the effectiveness of automated systems.
For many of my clients the only conversions we track is if we implement click to call.
Unfortunately, this only makes up a small fraction of their conversions.
Often, they can’t make the necessary changes to their website to track other conversions.
Another detriment to using automated bidding is that for your business, all conversions don’t have the same value.
For a plumber, the value from repairing as ewer line is significantly higher than for a simple plumbing repair.
For many service providers there is a large difference between what they make on various projects.
Finally, if your budget is limited, then this might limit the number of conversions you successfully track.
Learning Where the Market is For Your Keywords From Google Keyword Planner
Before you can bid you must first develop a keyword list. The tool to do this is the keyword planner in Google Ads.
I won’t go into how to use this tool in this article.
The one thing I will advise you is to make sure the search for keywords is in your market. If it says the United States in the upper left corner, but your market is San Diego, then change that.
Focus on two columns in the planner.
Top of page bid (low range) tells you the amount that likely gets you on the page and occasionally even the top spot. Top of page bid (high range) is the number you most likely need to bid to be the top position in the search results.
With both the numbers are an approximation and once you begin bidding, you might find both of these numbers are inaccurate.
What I would suggest is that you bid the low range, if not even a little smaller. That’s because you want to start out slowly with your campaign. Unless you have a short window to run your campaign, there is no reason to get into the market aggressively. Especially if you have a limited budget.
One of the many advantages of Google ads is that you start to get data right away. Let your campaign run a day or two and then look to see what impressions you have and hopefully clicks.
If there are no impressions, then it means you have to bid higher. Likewise, if you see your average position is 3 or higher, then you need to bid higher.
In contrast, if you see a lot of impressions and a position of 2 or 1, with little to no clicks, then you might want to revise your ads.
Before You Set Your Bid, First Set Your Monthly Budget
How much you bid should be determined by how much you can spend. This is something you must decide.
Let’s say your budget is $1000 a month. That means you should set your daily spend to about 33 dollars a day. If you’re paying 10 dollars a click that is just 3 clicks a day. That’s not very much.
Your campaign won’t be running most of the time its scheduled to run.
Ideally, you want to be able to get 10 clicks a day.
The Dilemma of Limited By Budget
If you log into your account and see limited by budget next to a campaign, it means your campaign isn’t running the entire time it's schedule.
If you can’t afford to increase your budget, then you need to adjust your strategy.
First consider lowering your bids.
Lower bids in stages. You want to make sure your still getting clicks, even if your warned that your below first page bid. That doesn’t matter if your getting enough clicks to reach your daily budget.
With a lower CPC you get more for your marketing dollar.
The second option is to limit your total number of keywords. If certain words have less value, but are getting clicks, then they’re taking away budget from your higher performing keywords.
You might get fewer clicks as a result, but if these words result in more conversions, than this doesn’t matter.
A third option is to look for cheaper keywords to target. The risk here is that these words are cheaper for a reason. They’re less competitive because they often result in fewer sales or leads.
Your ultimate goal is to get the highest return on your investment with Google Ads.
Don’t Get Caught Up in Being Number 1
I hear customers all the time tell me that they need to be number 1 in order to get business. And the data does show that the top 3 spots usually convert the best.
That doesn’t mean you need the top spot right away. It can be expensive to be number one. Most often you can convert by being in the number 2 or 3 spots without the high cost.
And you might find yourself in the number one spot as the day progresses.
Most likely the most competition you’ll have is at the beginning of the day when everybody’s daily budget hasn’t been spent.
As your competitors get clicks they may start to drop out of the competition. Halfway through the day, you might get a top spot without spending nearly as much as what it would have cost earlier in the day.
Google no longer shows average position for your keywords.
Instead, they provide two other competitive metrics they feel are more important.
The reason is that an average position of 1 only means you have the top ad. Not the top spot on the search results page.
Search top is means your ad is one of those that appear at the top of the page, above the organic listings.
Search absolutely top is, means your ad is number 1.
If you’re getting enough clicks each day to reach your daily budget than don’t increase your bid.
In fact, if you’re reaching your daily spend regularly, then consider lowering bids across the board to get more clicks each day.
Remember Your Maximum Bid Could Be What You Actually Pay
Google Ads determines your bid based on your maximum bid and the bid of the next bidder on the keyword.
As I mentioned your bid will be one cent more than the bidder below you.
Unfortunately, this can create a misconception when people place their bids.
They overbid thinking their bid threshold will never be reached.
Yet, if your keyword suddenly gets more competitive you could suddenly be paying your full bid. This could result in overpaying for keywords and a complete drain of your daily budget.
I had a client who consistently wanted to bid extremely high on one of his keywords because he always wanted to be number 1. That was fine when his competitors were bidding much lower than he was, which kept his costs down.
When a new competitor entered the scene and bid high, as well, my clients bids suddenly tripled in cost.
Why A Low Cost Per Click Shouldn’t Be Your Focus
It’s important to remember that your ultimate goal isn’t necessarily a low cost per click. It’s to have a low cost per conversion.
When I take over an account, clients are often disturbed when their cost per click goes up.
The reason is that they were spending a lot of money on clicks that didn’t benefit them. A look at their search terms revealed clicks by people looking for competitors or services in other locations. Or items that had no relation at all to their business.
The increase in cost per click was related to the increased value of their keywords. They were spending more per click, but as a result, were getting significantly more leads and phone calls.
Cost per click could be a criteria for a campaign’s success, but not the main objective.
Why a High Bid Might Mean Nothing - The Impact of Quality Score
You don’t want to forget that your ad position is determined by your Ad Rank.
If you have a high Quality Score you can actually have a lower bid then your competition, but still show up in a higher position.
Google is interested in the ads that people click. Not ads that someone bids high for, but which no one clicks.
This means if you have a low Quality Score, then your forced to bid higher. It also means that your ad could stop showing. This is why you get a warning about this.
This warning applies no matter what bidding option you have chosen.
Click through is one of the main criteria for Quality Score and this comes down to how people respond to your ad.
Spend some time on your ads to create something that captures the attention of your prospect and compels them to click on your ad.
Once you factored in all of these elements, then set your bid for your keywords.
Monitor, test, and evaluate all the time. Your bid is often going to change, so work to make sure it's of value and not breaking your budget.
If you don't have the time or the experience needed to manage your campaign, then consider hiring a Google AdWords Consultant to help with your campaigns.