Bid War - What To Do?

[Dmitri010]

Hi everyone!

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 don’t know what to do. I don’t 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 don’t want to drop out either.

What to do? Any advice would be greatly appreciated!

[percentages]

>You guys are going about this whole thing wrong.

Yup....you sure are. WebWoman...think "directory"....Golden opportunity being wasted here;) I doubt the legalities will ever come back to bite you in the butt, however the "directory" solution solves those and makes money for everyone but Overture. Who really wants to pay another middleman anyways?

Dmitri010....your enemy is not your competitor(s) it is Overture. Maybe you can't do a WebWoman type deal if the competitor is hostile, but you could try an alternative strategy not related to Overture that would surely put several nails in their coffin;)

In my tests Overture Sponsorship captures less than 5% of seaches verses regular SERP's. Fighting over the 5% is really pointless, aim at the other 95%+.

[Bottler]

People playing silly webmaster wars are fun to run around in circles. Here is what you could do.

1. Find out the hours of the day when you make the most money from the searches.
   
2. Bid 1c higher than the competitor during those peak times. (Try to automate this. If not possible, persist with it for enough days for your competitor to notice)
   
3. The rest of the time bid one cent more than the second highest bid (assuming his bid is sensible. If not, then this strategy applies to him too.)
   

There are three possible outcomes to the above strategy.

1. The competitor sees you bidding much lower for most of the time and decides to lower his bid one cent more than your sensible bid and keeps it there.
   
2. The competitor sits down for hours and analyzes what you are doing and try to defeat this strategy.
   
3. The competitor keeps his bid always outrageously high to guarantee having his site more highly placed than yours.
   

You will either end up with significantly more money than you would have in a bidding war situation (and probably more than your competitor) or you will teach your competitor a lesson that being a silly little numbskull is more trouble than it's worth.

OR you could quit being a silly little numbskull yourself and just focus on finding profitable keywords your competitor is too busy congratulating himself to ever think of. ;-)

[ogletree]

So percentages you are saying that when people go to Yahoo they will only click on overtrue ads 5% of the time. They will choose to go with the free ads instead. What were your tests. What about when the SERPS return useless information? Almost all my traffic comes from Overture on Yahoo. I am working on the SEO now. I am pretty excited if it is true that I could get my traffic up 95%. Even if it was 75% would be great.

[pchristensen]

I see the same thing with LookSmart....although something strange is going on there. I have two ad budgets: $100 on Overture and $100 on Looksmart. The Looksmart budget reaches the monthly limit in 2 or three days. With Overture, I can go nearly the entire month.

I suspect games are being played either by competitors or Looksmart itself. I know that the clicks are supposed to be IP-specific to allow only one click per use, but something is not adding up (no pun intended) with Looksmart.

Anyone else notice anything similar in their campaigns?

[jhood]

Collusion is a polite phrase for this. It's price-fixing and if you are successfully controlling the market for whatever you're advertising (yes, even legal services), it could get you in hot water. The Federal Trade Commission routinely prosecutes doctors, pharmacists and other respected professionals who get together to fix prices. It's anti-competitive behavior and it's not a good habit to get into.

You don't specify what action you would take against "intruders" but the anti-trust laws are specifically written to protect new entrants from being locked out of a market by the established players. If you're going to continue to do this, you ought to stop talking about it.

[drewls]

price fixing? Where do you get that? It's a free bidding situation. If people want to bid more, they are free to. I don't see how that is something that has anything to do with anti-trust laws, or anything illegal at all for that matter.

[Dmitri010]

drawls,

It is a price fixing situation because the person we are discussing has a

client who has gotten together with his 2 main competitors on some agreed upon bidding strategies. We have an understanding that keeps our 3 sites at the top without the silliness of bidding wars. It's all very civilized...until an intruder shows up - but we have a plan for those too :)

[drewls]

That's actually not price fixing. If the three companies got together and discussed the pricing in their own industry and then agreed to keep prices the same, then THAT would be price fixing. Agreeing to be nice to each other in bid wars is not illegal and it is NOT price fixing.

[Mardi_Gras]

price fixing? Where do you get that?

Three competitors discussing what they will pay for a given service - in this case, a listing on Overture - and conspiring to limit that payment to a certain maximum amount - is not a "gentlemen's agreement," as the participant wrote - it is price fixing. In the US, at least, this is clearly illegal.

[rogerd]

Drewls, check out the Sherman Antitrust Act. It prohibits combinations in restraint of trade. Price fixing is probably the most common offense, but any coordinated action between competitors can fall under this - bid rigging, geographic partitioning, etc.

[Mardi_Gras]

Wow - it gets worse, after re-reading the original post:

until an intruder shows up - but we have a plan for those too

So they are also conspiring to keep other competitors - who don't have the good fortune to be a part of this fine little gentlemen's club - from actively participating in the free-market Overture system by, apparently, coordinating bids to force the interlopers out of the competition...amazing.

[1milehgh80210]

i thought the Sherman Antitrust Act was designed to protect the customer/consumer or prevent restraint of trade. The 'conspirators' in this case ARE the customer (they are not in the PPC business)
What if three companies decided not to use a certain adv. option at all? Would that be price fixing or a boycott?
PPC uses the auction format...so what if my buddy & I decide before walking into an auction to set a $100 limit on our bidding for a certain item? Have we harmed the auction house? Some would say yes I'm sure, but in some cases the auction benefits from an additional 2 customers.

Another non-lawyerly opinion.

[Mardi_Gras]

What if three companies decided not to use a certain adv. option at all? Would that be price fixing

Yes - it would be a conspiracy to restrain trade. Competitors in the US cannot get together and agree to not use a particular service or medium. It is illegal. Likewise, those same competitors cannot get together and conspire to set a maximum price they are willing to pay a vendor.

[canucks1980]

If what webwoman is doing illegal how come every gas station in my hometown is charging 81.1 cents per litre while a smaller city an hour away charges 75 cents per litre. This makes no sense considering we are closer to the gas supplier. There is clearly collusion happening and no one is doing anything about it

[rogerd]

canucks1980, what you are describing COULD be the result of collusion, but could also be a result of "follow the leader" pricing. It's not illegal for a gas station owner to have the policy of adjusting his price to the price being charged by the guy on the opposite corner. I think, in fact, many stations follow this exact policy. It's only illegal if he calls up the other owner to arrange prices.

[canucks1980]

We are currently paying $2.33 per US Gallon.
I think if we reduced the number of gas stations we would reduce the cost of gas.

The city needs to do something about this...

[SEOMike]

Amazing the dynamics of this thread! Talk about hitting a sore spot here Dmitri! It's gone from some good simple advice on how to scare someone by bidding $10 a click and hoping they don't call your bluff, to a conglomeration of companies engaging in price fixing, to international debate on the price of gas. Wow... bet you never expected THIS! Ok, here's MY two cent's worth...

Do what it takes to stay in the top three as long as your ROI is good. Write the best darn ad copy you can, and make it better than your competitors. The BEST answer is to seek to improve your "natural" position in the engine through good SEO. What's better than a FREE first place listing?!?!

[Opportune Moment]

Collusion is totally illegal in these types of scenarios. If overture ever found out you (or your company) would be banned possibly forever. I would not recommend taking the risk. The other thing is that if you think all the other players are honoring your agreement..think again.

Also what happens when new competitors enter the mix, which they will. What you are talking about is not a solid bidding strategy at all.

[ogletree]

Would it be Collusion if you just told you competiter that what ever he bids you will stay one penny below his no matter what his bid is. He could have figured that out by watching my bids.

[Opportune Moment]

Simply telling someone "fine I'll bid one penny less and reap the reward of the gap" is not collusion. Collusion would be to formulate a plan so that on Monday Wed Friday you were in #1 place and the other days your competitor was. Any kind of formalized plan such as that is certainly illegal.

[rogerd]

Communicating with a competitor about pricing is illegal, regardless of how simple or complex the scheme might be. Period.

Guessing what your competitor might do, or following his lead in a predictable manner, are not illegal.

[Azrael]

'Communicating with a competitor about pricing is illegal, regardless of how simple or complex the scheme might be. Period.'

Oh for chrise sake. Communicating with a competitor about 'pricing' isn't even vaguely 'illegal' unless those conspiring/colluding are in a position to 'restrain trade'.

If Microsoft and Sun and SBD and Apple *and* Linux get together and agree not to sell their OS' for less than $3,000; now *that* would be illegal...

Unless a big chunk of the market was run by DR, with a competitive product, in which case the market would probably shift in their favor.

This whole argument, however, has been silly, since the only restraint has been on how much *customers* are willing to pay for Overture services. There is and never has been any discussion of preventing some wacko from bidding more than the 'cartel'.

It's like arguing that suicide bombers have no right to demand 13 virgins in the afterlife rather than the offered 12.

Silly silly silly

Az

[webwoman]

Welcome to Webmaster World, Az. And thanks for the chuckle!

[rogerd]

Well, if the top bidders on an Overture keyword get together on pricing, they are in a position to restrain trade and injure Overture.

I'm not saying stuff like this doesn't happen all the time... But I do think that arguments that it's an appropriate business practice are specious.

Oh, and welcome, Azrael! :)

[Mardi_Gras]

There is and never has been any discussion of preventing some wacko from bidding more than the 'cartel'.

I guess you missed this part:
until an intruder shows up - but we have a plan for those too

Trust me, a group of competitors geting together to fix a maximum price they will pay a vendor for services - and conspiring to keep other competitors from exceeding their maximum bids - is very illegal.

[shorebreak]

IMO, the real problem is that you're focusing on bidding strategies for individual keywords as opposed to your entire portfolio of keywords.

There are tools that now exist to let you manage your keyword portfolio as just that - a portfolio. Figure out your business success metrics, and let a smart algorithm do the rest.