AdWords 101: A Bidding Guide for Ecommerce Merchants

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Adwords bidding represents one of the most important factors that determines how you show up in Google and other search engines. With Google, your bid makes up one of the two variables that create your Ad Rank (the other is quality score). Ad Rank determines if and where you show up on the search results page when customers search for your products. How you bid will directly impact how you show up in the search results and it’s a variable you can easily adjust.

Deciding Where to Start

Deciding what to set your bids to can be tricky because the amount of competition, pricing, and conversion rates vary from industry to industry. Tools exist for predicting the amount you can expect to pay based on current search competition, but you won’t truly know what kind of traffic and sales your bids yield until you begin running your campaign.

A good starting point is to decide what you’d ideally like to pay to generate a sale; in other words, your cost per acquisition. For example, if your goal is to spend $25 per sale and estimate that 3% of searchers clicking your ad will purchase, then you would set your bids to $0.75 per click.

The formula for this is: CPA Goal * Conversion Rate = Max. CPC bid.

If you start with that bid and your estimates are correct, you’ll spend ~$75 for 100 clicks and generate 3 sales, each sale costing you an average of ~$25. These numbers may not be exact because your initial set bid is a maximum, so you will often pay less per click. If you have no data to reference, be reasonable with your estimated conversion rate. For reference, the average conversion rate for ecommerce sites is 2-3%.

Setting Your Bids

In Google AdWords, you can set your bids at the ad group and keyword level (or whichever type of targeting you happen to be using besides keywords).

To set the bids at the ad group level, enter your bid under the Default Max CPC column. CPC stands for cost-per-click, so when you set this value you are specifying the maximum amount you’re willing to pay every time a searcher clicks on your ad. Other methods for bidding exist besides the cost-per-click basis which we explain later. Max CPC gives you complete control to set bids and make sure you’re not spending over a certain amount.

If you set your bids at the ad group level, all of the keywords in your ad groups will default to that bid. However, if you want specific keywords to have different bids than what you set the ad group, you can modifying the Max CPC at the keyword level.

To illustrate, let’s say you have an ad group with a bid of $2.00 and 100 keywords. If you set 10 of those keywords’ bids to $1.00, those 10 will override the ad group bid and max out at $1.00 while the remaining 90 will stick to the $2.00 bid. Generally in AdWords if you set a variable at a lower level, it will override the settings inherited from a higher level. For example, ad groups inherit settings from the campaign level but also override them if they have their own specified set.

First Page Bid Estimates

After adjusting your bids or launching a new campaign, you will often notice a warning for certain keywords that are “Below first page bid”. There will be an exact bid amount listed, which Google thinks is needed for that keyword to appear on the first page . This warning will appear in the keyword’s status column. We recommend taking these warnings with a grain of salt. We have seen many keywords below the estimate appear on average in the first ad position, on the first page, and appeared for over 50% of their eligible impressions.

We recommend looking at your data before deciding to raise your bids to meet the estimate. If the keyword receives almost 0 impressions daily, shows a low average position (higher than 1 – 4), or a low search impression share (columns > competitive metrics > search impr. share), it’s probably worth raising the bid to give the keyword a chance to run.

With new campaigns you’ll often notice that the first page bid estimate can be much higher than what seems rational, and it fluctuates quite frequently. A new campaign doesn’t have built-up data for click-through rates and other metrics to show Google that you are an excellent advertiser that only displays relevant ads.  This means that the estimates for your first launch can be higher than what you’ll be paying down the road. Still, you’ll often have to meet these estimates to start showing in the first place! Once your data proves that you are a reputable advertiser with engaging ads, you’ll be rewarded with higher quality scores (the other component of Ad Rank) that will ultimately lower the bid estimate and your actual cost-per-click. As always, treat these estimates with caution and trust your data.

Raising and Lowering Bids

When deciding to raise or lower AdWords bids, it’s important to consider your conversion data first. In order to have conversion data, you need to have conversion tracking.

You can start this setup process in AdWords by navigating to Tools > Conversions > +Conversion. Code generated here will then go on your order finished page. Once you set that up, you can add columns for metrics like total conversion value and cost/converted click.

When looking at your keyword or ad group data, if you notice areas where with a low cost per acquisition that generate a healthy conversion value, it’s probably worth raising your bids to capture even more of that valuable traffic. However, if you notice one of these productive areas has a search impression share of above 90-95% and a high average position (1-2), it may be possible to lower your bids while keeping the same quality and level of traffic. You can always check how much eligible traffic you’re receiving by checking the search impression share. It will show how many eligible impressions you’re receiving and if you lost impressions due to a low Ad Rank or from your budget running out early in the day.

Like we mentioned, if you notice a keyword with a very high average position ( around 1-2) and you’re showing up for nearly all your eligible impressions, you’re probably reaching the max of what your bids can get you and they can come down.

If you notice a keyword or ad group that converts but does so while spending too much money, (ex: the actual CPA is $75 per sale when you need to be closer to $25 per sale) it’s time to start lowering the bids. If you’re spending a ton of money in some areas and not generating a return, it may even be worth pausing the ads rather than trying to make them profitable. For instance, if you have a keyword with 500 clicks costing $500 with no sales to show for it, you would be better off pausing that keyword and focusing your budget on more profitable areas.

Similarly, if you have an ad group or keyword that’s close to breaking even and you don’t want to raise the bids anymore, you can always try to raise the conversion rate by writing better ads or using different landing pages.

Mobile Bid Adjustment

One important bidding factor that often gets overlooked is the mobile bid adjustment. You can find this column in your campaign’s settings under devices. The column next to mobile devices “Bid adj.” may not look editable, but you can edit for mobile devices.

Set a percentage to increase/decrease your bids for mobile searchers. For example, if all your bids are set at $1.00, and your mobile bid adjustment sits at -50%, you’ll bid a max of $0.50 for mobile searchers and a max of $1.00 for searchers on tablets and computers.

Mobile bid adjustment is important because the conversion rate for mobile devices and computers/tablets differs greatly. If you have a site that’s not mobile-friendly, you could convert 3% of your desktop clicks and 0.10% of your mobile clicks. With this example you’d be better off spending your budget on desktop clicks and lowering your mobile bid adjustment to filter out mobile clicks entirely (-100%), or lower it to an amount where you can still meet CPA goals.

Conversely, if you want searchers to call you when you see your ads, it may be worth raising your mobile bid adjustment to pursue those searchers. A warning: in general mobile clicks cost less than desktop clicks, so you can still be receiving a lot of mobile traffic with a negative mobile adjustment.

Other Bidding Strategies

Other bidding strategies exist besides manually setting maximum CPC bids. You can let AdWords set your bids to help maximize clicks within a target budget, taking the control out of your hands.

Within the Google Display Network you can use CPM bids, which bid for impressions rather than clicks. Two strategies exist that can be used in the settings with Conversion Optimizer enabled (a site needs at least 15 conversions a month to use).

You can enable enhanced CPC, which uses your and Google’s data to automatically raise and lower your bids depending on the likelihood that a given click will convert. Or you can focus bids based on your target CPA. With this strategy, you’ll set CPA goals and AdWords will bid with the intention of meeting those goals. With any of these automated bidding strategies, it can save you time, but not always money as you will have little control over the bidding.

Closing Words

Remember: always trust your data when deciding where and how to set your bids. Conversion rates will differ across keywords and ad groups, so adjust your bids to reflect those differences. Raise your bids when there’s potential for increased profit, and decrease bids when you’re overspending for the given budget or generating low returns.

When deciding how to adjust your bids, reserach your conversion data, search impression share average position and other key metrics. If an area doesn’t seem salvageable because the conversion rate is too low and the bids you’re paying are too high, it may be worth it to pause that area and try something new. As always, Volusion’s Marketing Services team is here to help and we have many affordable options to help your business get a traffic boost in the new year.

Good luck and happy bidding!

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