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It seems common to have the "high-bidder" problem. Has anyone ever "waited-out" the competition? How long does it take for the competition to go broke or smarten-up?
Conversely, are you a "high-bidder?" Do you hope to steal all of the sales, and let the "low-bidders" exit that market for lack of sales?
Yes. A lot bidding resolves around being #2 now. Blame that on Overture's Autobid system. Before the Autobid system a lot more companies would seek the top spot. But Overture's Autobid system has changed some people's strategies. OV's Autobid makes for strategies that allow advertisers to bid up the competition and leave 'em paying an huge rate..
#1 bidder "Ted" has max bid of $2 using OV autobid
#2 bidder "Jay" is at $1..
So the "Ted" is paying $1.01 for his clicks..
I come along and set my autobid max bid @ $1.99. Now:
#1 "Ted" is paying his max bid of $2
#2 "Myself" is paying $1.01
#3 "Jay" paying $1.00
So "Ted" notices this and sets his max bid @ $1.98. Now:
#1 "Myself" is paying my max bid of $1.99
#2 "Ted" is paying $1.01
#3 "Jay" paying $1.00
on and on it goes up and down... Throw in a few more bidders using autobid coupled with a 3rd party tool and the logistics change. But being #1 is very rarely the spot to be in :)
I'm always on the sidelines kinda like a referee. I've talked with people who try to outlast the competition through low bidding and others who try to outlast the competition by by cornering the market with high bids.
To me, neither makes that much sense. I say bid what you can afford to bid to make a certain return and so be it...
PPC advertising is very simple. Therefore there will always be competition. Companies will constantly be coming and going. If you're the guy trying to stamp out the competition, rather than worrying about your bottomline, you're more apt to be one of the companies going. My $.02 :)
Thats why its very important to have a large
assortment of minor keywords, that provide a
steady and mostly unchalenged source of leads.
If the bidding gets crazy, just opt out of the
given keyword for a while. Economics will eventually
rule the day.
Where it gets murky is the ongoing value of a clicker.
If you take an industry like printers. There are companies bidding $3 on keywords for phrases relating to inkjet cartridges that probably cost around $1 and they sell for maybe $2.99 so you think well how can they bid $3 for a product that they make $1.99 on ?
The answer lies in the fact that people may buy several items and will almost certainly plop the site in their favourites assuming they buy and the product is OK. The lifetime value of a client therefore can make this apparently suicidal bidding practise logicl after all.
But, there is also a lot of kamikaze bidding going on, poor tracking and deep pocketed advertisers with holes in.
Strategical bidding is very much the order of the day.
A lot of buinesses went under, using the premise
of capturing market share and branding, not realizing
that repeat customers are much lower than in a brick and
However, the opposite seems to be happening. We've had to drop our prices twice in the last month to get the sales conversions necessary to make paying for clicks a worthwhile proposition. The quickest way to go broke is to pay for clicks but get zero sales because your prices are higher than your competitors.
In the end, it seems the winner will be the "lean and mean" merchant with the lowest overheads who buy their goods at the lowest prices. This enables them to bid the highest price for clicks and to charge the lowest prices while still making a profit. They get the majority of sales conversions and their competitors either drop out of the PPC program or go broke.
In the end, it seems the winner will be the "lean and mean" merchant with the lowest overheads who buy their goods at the lowest prices
Which is no different than the rest of the retailing world. Sounds like you're defining Wal-Mart. Making money on the web is not any different than making it any place else :)
It depends on how long the sales cycle is.
If it's a 10 dollar cart item, you can find out post haste what your ROI is. On the other hand, if the sale requires extensive sales and financing follow up, the ROI may not be determined for months.
I think many categories have a "lemming factor" bid process, i.e. If the other guy is paying 6 bucks a click, it must be worth it, therefore we will bid like lemmings..
The most efficient model is using just in time
inventory and ordering from the manufacturers.
Of course this means volume, otherwise the
manufacturer will force you to use a distributer.
Amazon started with no inventory, look at them
now. Its amazing how quickly a coffee table operation
can grow into a business that has a traditional buisness
structure, and cost overhead.
If you're the guy trying to stamp out the competition, rather than worrying about your bottomline, you're more apt to be one of the companies going.
If the bidding gets crazy, just opt out of the
given keyword for a while. Economics will eventually rule the day.
If it's a 10 dollar cart item, you can find out post haste what your ROI is.
I agree with all of the above, but how long does one have to wait? Have you ever seen a bidder drop out? It's interesting to me that we all seem to agree that no one should spend more than a certain amount to get a customer, but no one has said that they have let the bidding go crazy for X months, and have the others drop out.
Maybe Overture's new auto-bid system is what will work for us here. I decide that $.50 is all I want to spend. I set my bid there, and allow everyone else to outbid me. Maybe in a year or two, they will go away...maybe.
Amazon started with no inventory, look at them now.
True. But more accurately, they had no inventory, and a few million $ in venture capital money. ;)
everyone wants 2nd and 3rd. 4th seems to get you shown very little.
Excessive max bidders often find me a penny under them + me and friends very busy on the keywords! (not very ethical?)But they have such huge budgets they don't get the hint!
What I'd like to know is this. In most industries you have serious critical mass/volume and it generates a healthy discount or favourable payment terms. Would eBay or other large advertisers get a significant cost reduction because of this large inventory and even larger monthly bill ?
They can have lower bid prices and lower rankings because they can generate listings if no other advertisers are in that position.
They all said, in as clear a language as you could ever want to hear, that they don't and have no plans to offer anyone volume discounts. In fact, they said it would undermine their entire business model.
Other PPC services may offer volume discounts, but I've been going on the assumption that these Overture folks were telling us the totally straight truth.
I also agree that these listings do take away from the results and I think that overture would rather not deal with these small bid prices for higher volumes. I refer to those listings as SPAM listings. Mainly because they are catch all phrases. Most of the time these backfill results are bid into search engines at a penny or less. Its really just a way to generate revenue from keywords that normally do not provide paid listings.
I understand what you are saying with the backfill thing, but I was more curious on the editorial standards. All of the PPC providers, quite rightly, are trying to adhere to strict editorial standards, but often we hear of advertisers getting their ad canned because of relevancy. I wanted to know if there were double standards or if we all were on the same song sheet.
I notice Google and Espotting are advertisers on their own inventory, and didn't know how that sat with others ? Personally, I'd like to see them use different methods to promote, but I suppose it's a bit like a Audi salesman driving to work in a BMW, wouldn't look good (because they won't be endorsing the product, not because one is better than the other).
Sometimes those "fill in the blank" listings say very absurd things that no editor would ever let past, and the click-through page can also be "off" from the search term. But they still pay the going rate IF they get a click.