Advanced Adwords bidding strategies

In Yesterday's Search Day article: Are Bid Management Tools Dead?, Eric Enge, writes some interesting facts and conclusions he brought from SMX.

A solid strategy for your PPC campaigns will have the following elements:

1. Use a bid management tool to manage the long tail of your campaign.
2. Stay focused on your ad copy and your landing pages, because they can dramatically influence the cost and conversion rates of your campaigns.
3. Take significant brand building terms and manage them separately
4. Take significant "first visit search" keywords and manage them separately as well.

While I think it is no longer necessary to manage large lists of long tail keywords for PPC campaigns (thanks to broad matching options), I do see great value in bid optimizing tools on improving the ROI of your PPC campaigns. I want to focus on one particular aspect that was brought forth. Brand building and "first visit" keywords should be managed differently, and should be left out of the automated bid management tools. They provide no direct measurable ROI, but they are definitely very important to have. This is the strategy I use to build PPC campaigns. I take a few more variables into account, but I will provide a detailed high level overview of this process.

Organizing the keywords

The first step is carefully organizing the keywords. I organize them using the following criteria: if they relate to the brand, if they are generic or action keywords. I further organize the keywords by how relevant they are to my business in a scale of one to five. Five being the most relevant and the most likely to turn into a conversion.

Initial maximum bids for ROI (money) keywords

I estimate our initial maximum bids by doing the following:

I want no less than 100% ROI and assume at least a 1% conversion rate (The ROI and conversion rates are usually higher than that). Use the net profit per conversion and with simple math you can determine what is the maximum you want to pay per click. That is for the most relevant keywords (#5 on your scale). Then, discount 20% for each level of the scale. For example, if the maximum bid for scale five is $1.5, for scale four it would be $1.2, for scale three it would be $0.9, etc. This strategy guarantees profitability.

Next, create four campaigns, each one at a different maximum cost per click (based on your relevance scale) and use Google Adwords Budget Optimizer. The Budget Optimizer will try to get as many clicks as possible and will manage the individual keywords' maximum bids automatically for you. Let it run for at least a month, carefully looking at your actual conversions and ROI. After a week or two you should have more accurate conversion rate and ROI numbers. Use them to adjust your maximum bids per campaign.

Managing brand building and "first visit search" keywords

For brand building you want as many impressions as possible, for the lowest possible cost. The content network is an excellent option for this, by using CPM ads and site targeted ads. Now, for brand building, using keyword search has a little bit different setup. You must obtain at least a 0.5% click-trough rate to prevent your ads from being disabled, but you want as many impressions as possible and very few clicks to maintain your costs low. The Ads are the key. Create ads to get the right message across, don't try to entice users to click. My strategy is to use position preference, target positions 4-6 and bid at the minimum or the minimum necessary to keep the ads running. This guarantees your ads will remain on display and you won't need to actively manage those campaigns. Big advertisers will usually want to be in the top positions (1-2). Position preference is not compatible with the Budget Optimizer, but for this strategy it is not necessary.

For "first visit search" keywords I use a similar strategy, but I try to get the visitors to click with an enticing ad.

Improving your ROI campaign performance with preferred cost bidding

After running your ROI keywords campaigns for a while with Budget Optimizer, you can generate reports that give you all sorts of useful information. One such information is the true value of each visitor per keyword. Using this information you can have more predictable spending and ROI. My technique is to create another campaign with preferred cost bidding, and move all best performing keywords from the Budget Optimizer campaigns. Set the preferred costs per clicks to the actual value of those clicks that you determined by running the reports. Google will automatically handle the rest for you.

Another popular and probably more efficient alternative, is to use advanced bid management tools that use portfolio based algorithms for bid management. These techniques require some historical data to be useful, that is where the Budget Optimizer campaigns comes in handy.

Google recently introduced Cost Per Acquisition bidding for the content network. I haven't used it and can't comment much on it. I can say that paying only per results sounds ideal for the advertiser. This is very similar to running an affiliate program.

There are many elements that are necessary to run a successful PPC campaign. For me, the ads and the landing pages are the most important ones to insure adequate conversions and ROI. Astute bidding can give you a big competitive edge. Especially in highly competitive markets.