The following excerpt is from Perry Marshall, Mike Rhodes and Bryan Todd’s book Ultimate Guide to Google AdWords. Buy it now from Amazon | Barnes & Noble | iTunes | IndieBound
How much should you put out on the table to start the Google AdWords game? That’s a vital question to answer. Fortunately, Google’s tools make it far less of a crapshoot when you first launch a new campaign or ad group.
Start with manual bids
Manual bids are the best way to understand firsthand how your dollars are working (or not working) for you. We don’t advise starting out using Google’s various automatic bid settings. Don’t run to those until you really understand how your bids are paying off for you. Start with fundamentals — numbers that you can personally see, respond to and adjust.
Frankly, Google’s machine isn’t good at figuring out what your bids should be until it has a significant amount of data. You’ll need to be getting at least 50 conversions a month (at the campaign level) before you start using automated bidding.
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Where to set bids
Google Display Network (GDN) campaigns can be a bit complicated. For now, let’s focus on Search.
Search gives you two options. The first (easier) option is to set bids at the ad group level. The second is to set them at the keyword level. Like a manual versus automatic transmission, keyword bidding gives you more control, but you’ll have more to watch and manage.
What to use as a starting bid
We suggest you begin by using Google’s Keyword Planner tool. Enter your keywords, and it will suggest a reasonable starting bid. If you’re not comfortable with Google’s recommendations, start with $1 or $2 per click. This will of course depend on your own budget and appetite for risk. Whatever you use, it’s only a starting point. You’ll be changing it often.
There are three extra columns of data that you’ll want to add next to each of your keywords to use as a guide for getting your ads seen affordably. You’ll find these under the Keywords tab: Click on the “Column Chooser,” then, under the “Attributes” section, add the three additional columns called “Estimated First Page Bid,” “Estimated Top Page Bid” and “Estimated First Position Bid.”
Different advertisers have different goals and different numbers they’re optimizing for. For our purposes here, we’re not aiming for more impressions, more clicks, or even more video views. We’re interested in conversions and your conversion data. Hopefully by now, you have your tracking set up, conversions are happening, and you’re starting to get conversion data.
Under the Shared Library in your account, you’ll find a section called “Bid Strategies.” There you’ll find the option to create six different bid strategies:
Related: Set up Your Google AdWords Campaign in 9 Steps
1. Enhanced cost per click (ECPC).
This is arguably the safest of Google’s bid strategies. It’s a good place to start. You select your default bid as usual, and Google increases or decreases your bid based on their calculations as to whether a particular click will lead to a conversion.
2. Target cost per acquisition (CPA).
If you’re using conversion tracking (which you should be), you can select this bid strategy. It used to be known as Google Conversion Optimizer. With it, Google works to maximize your number of conversions while still hitting your desired CPA. You set your target CPA dollar amount at the campaign or ad group level; Google then decides when to show your ads, who to show them to and how much to charge for each click so as to reach your goal.
Pro tip: Use your target CPA to adjust the total spend for your campaign. If you want to reduce your incoming traffic, don’t decrease your budget; instead, decrease your target CPA. This forces the machine to work harder to find you cheaper leads or sales.
3. Target return on ad spend (ROAS).
This is another option if you’re using conversion tracking. In this case, the strategy is to hit a target ROI. This means you’re going after a conversion value rather than a total number of conversions.
4. Maximized clicks.
With this method, Google automatically adjusts your bids to maximize the number of clicks you receive. You can set a maximum budget, but Google has free rein to adjust your bids in whatever fashion its system believes will deliver the most clicks. We frankly don’t advise this. If sheer traffic volume is more important to you than conversions, you may find this worth testing. Otherwise, steer clear.
Related: 7 Tips to Get the Most Bang for Your Buck When Buying Ads
5. Target search page location.
Google adjusts your bid based on whether you indicate you’re looking to get merely onto the first page of search results or to the very top of results. Be cautious with this one. Getting to the top of the page can be expensive. Be aware that you’re giving Google permission to spend your money.
6. Target outranking share.
With this method, you specify a website domain name, most likely one of your main competitors, and you tell Google to show your ads above that specific competitor. You can also specify the percentage of time you’d like to outrank them on the page. Note that Google doesn’t guarantee that you’ll always rank above your competitor; that will depend on how much your competitor is willing to bid. This is a risky strategy for beginners. If your competitors are bidding high, you may end up spending far more than you intended.
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