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I entered into a bid war with one of our competitors. The keywords we are bidding on are not traffic heavy but are very targeted to our services. This war has gotten to a point, where I am bidding $1.00 and the only other bid (our competitor) overbids me with a $1.01 bid! This is totally ridiculous!
I donít know what to do. I donít want to stay in the first position for $1.00 because I am afraid our competitor will just click us out of our budget. I donít want to drop out either.
What to do? Any advice would be greatly appreciated!
Thanks for your concerns. These 3 law firms have an agreement amongst themselves not to drive their bids sky high by getting into bidding wars. Collusion? More like an agreement amongst gentlemen. They 'take turns' at number 1, and 2 spots. They will bid outrageously high if one particular firm tries to take the number 1 spot - I guess they have a beef with her.
These people are fanatical about their search engine standings. They monitor their bids on an hourly basis - I could understand this time investment if it were e-commerce sites - but these are law firms.
My client is the only one among them who uses an seo. My client has 'natural' page one standings now, and I have gotten him out of that rat race, since I have been able to show him that he can have page one position one for 1/10 the cost that his competitors are paying with ppc.
But I really don't see this as a collusion issue. This is a small community of lawyers vying for a limited market in a very focused type of law practice in one state. They are not fixing prices - just agreeing to some limits as to what they will pay for ppc, and being considerate of each other rather than getting into the ridiculous bidding wars.
Am I missing a bigger picture?
Verbal or written communication to coordinate pricing or pricing strategies would be illegal if, in fact, PPC bids fall under price fixing/restraint of trade laws.
(Hmmm... I'm noticing the price-fixing discussion has kind of hijacked the thread about dealing with a bidding war... sorry about that.)
Of course price fixing or collusion is illegal. It goes on in a lot of industries, but I've never heard adults openly wondering about whether it's OK.
What is probably more common in Overture bidding, and legal, is "signaling" where competitors work together without ever talking to each other. You can see this happening in a lot of bid wars where a bidder will lower his price in an unarticulated invitation to others to do the same. Or when everyone sort of stops changing bids and (without saying so) agrees to stay where they are.
Thanks for the advice! Believe it or not, I have looked into the game theory (and even watched "Beautiful Mind" one more time!) for this specific situation. I knew that there has got to be a solution, but the benefits/payoffs/ROI are unclear. We are a small niche consulting company and have few projects (around 10K average). How do I even start making assumptions about ROI model? I have no idea.
As for the price fixing Ė it is an interesting issue and am glad it is being discussed. Price fixing is illegal. Period. Does it apply to this case? Well, I think so. Want to hear the facts of the case? Well:
1. Firms spend $$ on advertising.
2. Firms agreed on the price they will pay
3. The execute the agreement
4. Who has suffered as a result? Well, consumer for a start as they do not get a clear representation of a marketplace since other competitors are not able to enter. That is why government will interfere. How will they know? Overture will alert them since Overture is materially damaged as they make less money.
So, I am not a lawyer either, but this issue seems more into the black than gray. I knew a couple of people from one large (!) oil company that went to jail because they had lunch with execs from other oil companies and discussed pricing! So, I will stay away from this tactic, even though I donít think anyone will go after a small guy like me.
Who has suffered as a result? Well, consumer for a start as they do not get a clear representation of a marketplace since other competitors are not able to enter.
How is it that they are not able to enter? There is nothing stopping any other firm from bidding on the same keywords at Overture.
And as far as consumers not getting a clear representation of a marketplace - hogwash! They get thousands of pages of results when they type in their search term.
Collusion and conspiracy sound illegal - but they are only illegal if they are collusion and conspiracy to perform an illegal act. Example, there could exist a conspiracy to boycott a particular company's products. But since boycotting is not an illegal act, this is not criminal conspiracy. Agreeing to bidding limits for search terms at Overture is not illegal, last time I looked. Overture may conduct it's business however it likes, and they may consider it 'illegal' per their TOS, but that does not make it an illegal act in a court of law.
[edited by: webwoman at 5:34 pm (utc) on Aug. 14, 2003]
If that doesn't work, then you figure out whether it's worth conceding and just getting the sweet spot in those results, as others have said.
You are right Ė these are considerations that need to taken into account. Your points are well taken. Thatís what courts do when the case is heard. However, the main test for anti-monopoly policy (price fixing is part of this government regulated part of business) is whether damages are incurred. In this case, they are incurred by Overture.
If those firms were in Europe and the case was investigated, I can almost guarantee that it will be settled very quickly. In the US, the main focus on the consumer rather than corporations. Thatís why I brought it up and I think it has legitimate basis.
Should I start overbidding them until it gets to say 2.00 and then bid for the third position?
Do the math on this and you'll figure it out. If you don't have enough data to test out multiple spots, do short test runs to try to fill it in with a rough sample. See what works for you.
Your Profit = (Number of Clicks at Spot X * Conversion Rate at Spot X) * ( (Avg Income per Action - Avg Non-marketing Expense per Action) - (CPC at Spot X / Conversion Rate at Spot X) )
Although it's nice to be number one, profit is king. Let your competitors waste their time and money through their ego. In the meantime, boost your converstion rate through keyword research and optimization of your sales process.
Thanks! That is approximately the formula I would imagine using. The problem is: income per action is unknown. We do not sell products but services Ė highly customized management consulting projects. We get 250 visitors and none will contact us. Next day, we may get 150 and get two leads that will not work out at the end. Then, we may get 400 visitors and one solid lead, which may work out in 5 months with an income of 3K for example.
Consumers are smart enough not to buy on the first webste they visit, unless the "WOW factor" is there. in that case they "never" leave ;-)
If your site is at No 5 but is the best site on the field you will close the deal.
Bid conservatively, spend that money and effort on your site and you will end up doing better than the No. 1 spot.
The smartest thing to do is everyone bid 5, 6 and 7 cents. Then trade places each month and share the work. No one needs to be greedy enough to not share work and money
This is exactly what they are doing (but it's higher than 6-7 cents)
Webwoman, if I found your firm involved in this type of hyprocrosy I would not hire your services.
If you read my posts, you'll discover that I have seo'd my client OUT of this. He no longer needs ppc since he now holds top ranking naturally.
P.S. Shak is the voice of reason here.
When you first start with this, your information will not be very accurate, due to lack of data. But over time, you'll see trends in the amount of income you make over various periods of time, and then you can create an average income per sale, and an average income per lead. (Avg Income per Lead = Avg Income per Sale * Lead Conversion Rate)
The previously mentioned formula will work, though, if you substitute Avg Income per Action with (Avg Income per Sale * Lead Conversion Rate)
I hope this helps.
I DID notice that the Terms had been updated VERY recently: August 16, 2003. Just shows that Overture is a forward-looking company since the rest of us are mired here a couple of days back. :)
My first nomination! Woo Hoo! ;)
I actually had to write that sentence two or three times before it sounded the way I wanted it to. I'm glad someone noticed it, the thread seams to have diverged a bit.
Ironic how this thread has taken the same course as an actual bidding war. Everyone starts out trying to just get in the game, then slowly it's a strugle to get to the top with everyone getting suspecious and pointing fingers, then it becomes a complete free for all!
Well, maybe not...
Actually, most of the references you find for this law are academic rather than dealing with actual cases - probably why the guys who should know better figure they can get away with it. I think prosecutions are quite rare, and a penny-ante bid rigging scheme isn't likely to get a federal prosecutor salivating.
So I changed my theory on this stuff. I dropped all of my bids as low as possible so that I still stay at least at #5. I wrote some really good ads and found some keywords that nobody else was bidding on that actually return more visits than the more competative terms even though they are not searched as often. Funny thing is I'm still spending the same ammount in clicks per day at the lower bids, you know what that means? More Clicks!
Here's the real trick to Overture. Don't throw money at it, don't fight for the top position, just find out what ads work for you, make sure they are on the first page and find those great keywords that nobody else is bidding on.
I take my hat off to you too much information. You have encapsulated 100% the whole ethos of PPC.
Personally I blame the software vendors for encouraging this "competition killing" type of strategy.
If companies are that keen to work together why don't they pool their advertising budgets, and share the enquiries that come from the one ad that runs?
Crazy, crazy, crazy.
For a bunch of lawyers to have the time to sit around for hours managing PPC campaigns, what does that tell you? That would have to be the most expensive campaign managment you could get.
Crazy, crazy, crazy.
Then find the cheaper clicks as mentioned above and, of course, milk the heck out of Google Adwords. You can outmaneuver these law office stiffs.
And be sure to tell your client that you're forcing his competitors to pay $1 per click while you've got his average CPC down to X cents.
He'll love it. It will appeal to his egotistical nature and this whole stupid mess is caused by the lawyer-sized egos.
In my experience comparison pricing networks are much better than ppc search engines.
A customer will not go to the highest ppc bidder but will take the time to review customer comments and as well as prodcut base price.
For example if abc and xyc companies have the top bids on a shopping engine a customer will look at their products and then 99.9% of the time will search for best possible price on that product and compare it with other merchants on that site as well as the company's history reviews.
So on a shopping engine if you have the best product base price and a customer selects best price, if you are price competitive your results will come to the top of these search results regardless of what is the going bid.
So if you are paying a nickle and your competitor is paying a dollar, if your price is better your search result will come to the top.
In conclusion, if you concentrate on what makes the customer happy, trust me, they will come and find you.