Smart Way to Optimize Your AdWords Bids
Over the past few years, many different biding strategies circled the web. Most of them were based on experience, without any real reason why should they work for your business. The problem is that experience in online business is always limited. In some industries, ad positions between 4 and 6 give the best results, in other, first position works much better. Even in the same industry, different products can have different price, conversion rate or different business model.
Of course changing and testing different bids to achieve larger profit is always an option. However it takes too long and it can be really expensive. Automated bid managers can help, but time and money still remain large issues.
For this reason it would be ideal to choose bids that will work best for you without spending much time and money. So the question is: how to maximize your profit without spending months of adjusting the bids? This simple technique will show you just how you can do that.
All you need to use are AdWords Traffic Estimator and conversion tracking.
The measure we want to optimize is of course our profit. All other measures like ad position, CTR, conversion rate, CPC or even ROI are less important. First you install conversion tracking on your site, collect the data and calculate your average conversion value (divide profit by number of conversions). Then go to the AdWords Traffic Estimator and for each AdGroup:
1. Enter all AdGroup keywords.
2. Adjust your targeting settings.
3. Select bid range for the estimates. It should be the range where you think your optimal bid probably is. It is not a problem if optimal bid is outside this range (step 6 deals with that problem).
4. Make iterative estimates for the bids in selected bid range. E.g. if you selected bid range between 1 and 2 USD, make iterative estimates for AdGroup bids of 1, 1.2, 1.4, 1.6, 1.8 and 2 USD. More estimates you make, more accurate your results will be.
5. For every estimate, you need to calculate estimated profit. Estimated profit = Estimated clicks per day *(Conversion value * Conversion rate – Estimated Average CPC).
6. If the highest estimated profit is on one of the bid range borders, move your bid range and go to step 4.
7. If you are satisfied with the distance between estimated bids (if you think the results are precise enough) go to step 8, if not: select the bids with the highest estimated profit as the new bid range and go to step 4.
8. Bid that gives the highest estimated profit should become the new AdGroup bid.
And that’s it. If you want, you can use the same strategy to optimize bids on the keyword level.
Downside of this approach is that you can use it for search network only. There is no content network in the AdWords Traffic Estimator. To fix this issue and to automate the whole process, you can use AdWords Management Tool.
AdWords Intelligence as one of its many features includes Bid Estimator Tool. Bid Estimator Tool uses AdWords API to download statistical data for your AdGroups and traffic estimates for the whole range of bids. It uses advanced neural network algorithms to make those estimates as accurate as possible. AdWords Intelligence works for search and content network.