Determining Your Most Effective Bids

Too high? Too low? Learn to find the “sweet spot” with bids

This is an excerpt from Yahoo!’s Smart Start Guide, which is packed with helpful content to assist you in making your campaigns as effective as possible. Whether you’re an expert search marketer or just starting out, the tips from Yahoo!’s “Sharon Goodsense” offer practical search marketing insights. Download the Smart Start Guide.

Bidding can be a bit of a Goldilocks experience—your job is to find the bid that’s not too high, not too low, but just right for your business. Bidding too high can cause you to reach your daily spending limit after just a few clicks. Bid too low and you may not get ranked high enough in search results to receive the number of clicks you want. Before you set your bid, consider what you can afford to pay for a click. Remember that the bid you set is the maximum amount you will ever pay for a click. Your actual cost-per-click (CPC) will likely end up being less than your bid.

Do your homework before you bid
Goldilocks would’ve had a heck of an easier time finding the right chair to sit in if she had done a little homework beforehand. The same goes for you when it comes to bidding. Obviously, you want to get more customers to your site, but consider the action you want them to take when they’re at your site (and how much that action is worth to your business). You may want them to complete purchases or sign up for your newsletter. These actions are called conversions. The performance metric cost-per-acquisition (CPA) tells you how much a conversion costs, which is valuable when determining your bids.

To calculate your conversion rate, divide the number of clicks to your site that lead to a conversion by the total number of clicks to your site. For example, if 20 out of 1,000 searchers who clicked through to your site ended up converting, your conversion rate would be 2%.

It’s important to think about these different measurements and calculations, because all of them have an impact on your company’s ultimate return-on-investment.

Keep keywords and daily spending limits in mind
Think about your individual keywords and how much they are worth to you, as well as their conversion rates. Different keyword and ad combinations convert differently—you may want to bid higher for keywords that convert at a higher rate.

Your monthly budget is calculated by our systems as 30 times your account daily spending limit. Each day, when this spending limit is reached, your ads stop displaying online. When you determine your bids, it’s important to keep this in mind. If you set your bids too high, you may reach your account (or campaign) daily spending limit after too few clicks.

Use the forecasting tool to set bids that support your goals
You may want to use our forecasting tool to experiment with how increasing or decreasing a bid could affect your average rank in search results, the impressions and clicks your receive, and your cost-per-click. Play around with the slide bar or type in specific bid amounts. To find this handy tool, just go to either the Campaign Details page or the Ad Group Details page and click one of the bids next to a particular keyword or ad group. At the ad group level, you can set the bid for an entire ad group or set custom keywords bids.

Watching the Changes
Because the market and customer behavior changes, competitive bids change, too. Stay on top of these fluctuations by continually monitoring your click costs and bids. Remember: paying too much for clicks can mean you lose money, but paying too little can mean your ads get ranked so low that prospective customers overlook them.

In other words, it’s a balancing act. So, don’t be like Goldilocks—do your homework before you try that too-hot porridge.

— The Smart Start Team

Posted by Administrator

[ Categories: Did You Know?, How To's ]
Bookmark with del.icio.us Send Blog via 360°

18 Comments Add your own

1. Paul | November 17th, 2008 at 12:13 pm

Good article! Watching bid pricing is a daily
challenge and varies greatly between the major search engines,but also the lesser known ones.It pays(literally)to keep on it!Thank you
2. Mike @ WannaDevelop.com | November 20th, 2008 at 10:19 pm

Some very good tips there.

The first one you really need to pay attention to and do some extensive research as well as goal setting.

Best,
Mike
3. Bram Smith | December 18th, 2008 at 3:39 pm

Great tips. I’m an avid bid changer

I seem to be in my account many times daily adjusting bids to where I don’t necessarily hold the top spots, but at least on the first page.
4. Dan | December 18th, 2008 at 3:48 pm

all the discussions on bidding and conversion rates assume that everyone advertising is offering some product or service that is able to be converted online. Some businesses like mine (a service business) must speak with prospects by phone first and may not complete a deal right away, which makes it a completely different ball game. it would be nice if there were more recognition of this reality for many businesses.
5. The Unit | December 18th, 2008 at 3:54 pm

Don’t be that guy at the one spot. You spend a lot of money for clicks that do not convert. Try to be in the 4-6 range. Conversions their are a lot higher.
6. Ken @ SportoMotoring.com | December 18th, 2008 at 4:00 pm

Conversions are up this time of year That
rate will probably change after the holidays. Daily watch is important
7. Jerry | December 18th, 2008 at 5:08 pm

Dan,

Many of our conversions come via the phone. In fact, the largest orders usually come that way so it is difficult getting a real value to PPC conversions. You can always ask your customer how they found you to get some kind of conversion tracking.
8. Guy | December 18th, 2008 at 5:40 pm

Interesting discussion here:

>> Don’t be that guy at the one spot. You spend a lot of money for clicks that do not convert. Try to be in the 4-6 range. Conversions their are a lot higher.

Unit makes an interesting point about “waste,” but many, many of our clients perform well in 1-3 spot (meaning these spots can be profitable in many instances). The point is… “is high rank *profitable* for your business?”

>> “The performance metric cost-per-acquisition (CPA) tells you how much a conversion costs, which is valuable when determining your bids.”

This is more than “helpful,” this is how we should be thinking about bids… we recommend that our clients capture as much traffic as possible, as long as it’s profitable - which is where the CPA comes in. When your bids lead you to an unprofitable CPA, your account needs work!

Cheers to all,
Guy
DroidINDUSTRIES.com
9. Guy | December 18th, 2008 at 5:44 pm

Dan/Jerry:

>> Some service businesses must speak with prospects by phone first and may not complete a deal right away, which makes it a completely different ball game. it would be nice if there were more recognition of this reality for many businesses.

This is not a “beginner” topic, but there is a lot that can be done via *analytics* and *phone tracking* to make this process much more data rich, which can then inform bidding.

You are correct that the typical “conversion” data alone will not make bidding easy for a services company, but there are many work arounds available. We work with B2B, phone-based sales groups all the time, helping them get better ROI on that spending.

Cheers!
[Guy
DroidINDUSTRIES.com
10. rafe | December 18th, 2008 at 7:25 pm

i’m new to internet marketing-search marketing. How do I find out how much my competition is bidding? does yahoo publish these costs? Not knowing this makes me feel like i’m bidding blind. it is difficult to determine the cost per number of people searching.
11. Terra Andersen | December 18th, 2008 at 7:32 pm

No, Yahoo doesn’t publish how much your competition is bidding. (I wish they did though!). You figure this out through a bit of trial and error, and a lot of research. There are websites that tell you the estimated cost of a company’s monthly PPC campaign, but none that actually tell you what they’re paying per click.

I have always found Yahoo PPC to be a bit more unpredictable than Google, but just as good. I have also noticed that some niche’s perform really well in Yahoo that don’t do so well in Google, and vice versa.

I am currently running a campaign for a client that’s tough to calculate conversions on, for the sake of it being a service-related industry, and one that varies in pricing dramatically. We’ve found a good method though.
12. Dan Edmonson | December 18th, 2008 at 8:01 pm

It helps to write multiple ads. You’ll get better performance at a reduced cost. It will also improve your conversions and make whatever it is you bid, worth more to you.
13. Mike | December 18th, 2008 at 8:19 pm

Very light discussion. It offers no numbers or rules of thumb to help guide you thought the process of honing your bid. Nor does it mention the minimum to activate a keyword. But does offer the obvious to watch the bids so they don’t get away from you.
14. Free PPC Search Engine | December 18th, 2008 at 9:56 pm

Thanks for the informative article.

You can just use the Campaign Optimization Tool and just relax.

This is the best tool that YSM provided so far.
15. Rick | December 19th, 2008 at 7:43 am

We have found it’s all about tracking where the jobs come from, and what keywords are converting the best. Those are the ones you want to concentrate on.
16. Dani | December 19th, 2008 at 10:09 am

I agree with Mike about this article being weak. The article is called “Determining Your Most Effective Bids,” and the main advice is “determine your most effective bids.” Great. How?
17. tracy | January 5th, 2009 at 12:35 pm

what was ever so wrong with the old system of Yahoo letting you know what was the top 3 Bids: Top Bid, middle bid, etc..of the Top 3 in order to let YOU figure out if that was worth it and what position you wanted to be in??????
18. tracy | January 5th, 2009 at 12:36 pm

Boo…just let us see the top three bids so we can decide where we wnat to compete or be placed