Understanding Bids and Budgets

Going Once, Going Twice… Sold!

A downside of the online auction trend is that the charming auctioneer’s chant has become an endangered species. We may lament the loss of the auctioneer’s sing-song, but one thing remains constant to most auctions—the use of bids to reflect value.

When you set bids for ad groups and keywords in your search marketing account, you are essentially expressing your valuation of the amount you are willing to pay for clicks on your associated ads. But how can you know if the bids you’re placing on keywords—and the spending limits you’re setting for your account and campaigns—are enough to get the results you’re seeking?

Here are a few considerations to assist you as you decide whether or not to increase your bids or spending limits:

Setting Bids and Spending Limits
Before you can increase your bid, you have to set a bid. These bids should be aligned with your account daily spending limit and/or your campaign daily spending limit. And your spending limits should match your business goals.

Similarly, your bids should be based on your business economics and objectives. Bidding too high may find you paying more than the value of the click to your business. Bidding too low may not allow your ad to be displayed in your preferred position in search results.

Adjust Your Bid
You can use historical forecasting to help determine whether or not increasing your bid may help you attain a higher average position, more impressions or additional clicks. Reporting metrics and analytics data can also help you decide whether to increase or decrease ad group and keyword bids based on how they drive conversions.

Increasing bids for specific keywords in your ad group may also help you to get the best value from your highest-volume keywords. For example, you might set an ad group bid that would be applied to the lower-volume keywords, then set custom bids for the higher-volume keywords only. This would be faster than trying to set individual bids for each keyword. Remember, your cost-per-click and position in search results is based on a combination of your ad quality and bid, not just your bid alone.

Adjust Your Daily Spending Limit
Generally, ads are displayed until your account or campaign daily spending limit is reached. To ensure that your ads do not go offline after you’ve adjusted or increased your bid, you may need to adjust or increase your daily spending limits.

Alternatively, there are several ways in which you can improve your overall account and campaign performance, which should help you use your budget most efficiently. These include:

• Structure your campaigns and ad groups so that like items are grouped together.
• Fine-tune your keywords by using the available keyword matching options, such as advanced match and alternative text, as well as the insert keyword feature.
• If your account offers campaign optimization, use this feature to automatically optimize your bids and budget based on your business objectives.

And the next time you are at a live auction, try not to be confused by the auctioneer’s speedy cadence. You only have to be concerned with the two numbers amid all of the “filler” words—the current bid and the asking bid.

—Stephanie Bilberry, Yahoo! Search Marketing