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Ridiculous Affiliate Double Auction

Leading to artificial bidding war...

     
2:48 pm on Jan 14, 2005 (gmt 0)

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AWA has said that affiliates are now encountering a double auction - i.e. 1st auction between affiliates, then 2nd auction with all other advertisers (with independent pricing on each).

This is leading to me bidding 10 per click, to beat another affiliate who is bidding 9, but I'm only paying 0.20 per click in the end (as there's not much competition on that keyword with other advertisers).

i.e. example of bidding war:

Affiliate #1 Max Bid 10; CPC 0.05!
Affiliate #2 Max Bid 9; *not displaying*
Non affiliate #3 Max Bid 0.04

Surely this is ridiculous? The rate we're going, this will keep going until one of us is up to 40 per click (and the other at 39) but still only paying a final CPC of 0.05...

2:52 pm on Jan 14, 2005 (gmt 0)

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If there are only two affiliates and a handful of merchants who are bidding responsibly (that's an important point - bidding responsibly) for a term, seems the affiliates should pump up their bid to the absolute max.

The problem is, one wrong bid by a merchant, or the entrance by an affiliate for another company could end up costing the affiliates some huge $$ if they get price pinned using these techniques.

3:00 pm on Jan 14, 2005 (gmt 0)

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Not to be cynical or anything, but wouldn't Google want people to be bidding ridiculous amounts for clicks?

And not to be really cynical, but since the capitalisation bug means all affiliate ads are still showing, won't the $10 Max CPCs produce an actual CPC of $10 or thereabouts. Again, isn't this what Google wanted?

5:39 pm on Jan 14, 2005 (gmt 0)

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Surely this is ridiculous?

I don't think so. This is where your ROI should be based on for your selection. You can pay for 0.05 per a click with a new landing URL or 9.01 a click with the merchant landing page! Which one will give your a higher ROI?

6:22 pm on Jan 14, 2005 (gmt 0)

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You are all right in fact. It is ridiculous. Absolutely ridiculous. And for this reason people will have to have their own landing pages. Hence google will get what it wants without seeming like they are totally restricting affiliates. I for one am pretty sure my ROI cannot withstand these games and I certainly don't have time to watch my campaigns with the necessary vigilance.
6:37 pm on Jan 14, 2005 (gmt 0)

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Well after a day of this daft new policy, I've now reached a max CPC of 60 for a keyword, where my actual CPC paid is 0.40... Bizarre...
9:35 pm on Jan 14, 2005 (gmt 0)

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It now looks like there will be 2 ads per merchant. Given this situation, I don't think this is all that ridiculous. Let's take the case of the Max CPCs being as follows, with the CTRs being equal.

Affiliate 1 : $ 10.00
Affiliate 2 : $ 9.50
Affiliate 3 : $ 9.00
Non Affiliate : $0.05

In this situation, Affiliate 1 pays $ 9.51, Affiliate 2, $0.06 and Non Affiliate $.05. This might bring negative ROI to affiliate 1, so he reduces his max CPC to say $9.25, in which case the afiliate 2 has a negative ROI. This reducing then goes till they go below $9.00 when affiliate 3 comes into play. This game will stop only when there is positive ROI, in which case the bids will not be ridiculous.

This kind of Game Theory was my only fun course in college.

10:10 pm on Jan 14, 2005 (gmt 0)

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It now looks like there will be 2 ads per merchant. ~inasisi

Where did you hear that?

10:29 pm on Jan 14, 2005 (gmt 0)

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I saw two ads for each mercahnt for many of my keywords and so assumed it to be logic. It might just be a case of Googles glitches not matching the domains properly
10:31 pm on Jan 14, 2005 (gmt 0)

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Now, It seems one ad per search per URL. Recheck your monitoring keyword.
10:36 pm on Jan 14, 2005 (gmt 0)

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nope, still multiples per domain here in uk.
2:37 pm on Jan 15, 2005 (gmt 0)

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Looks like that's fixed now.
1:05 am on Jan 18, 2005 (gmt 0)

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I am in a situation where I have now maxed out my bid at $100 and am still not showing for my keyword. Am I correct in thinking that the other affiliates ad will continue to run indefinitely without any chance of my ad showing provided he does not blow his budget?
1:15 am on Jan 18, 2005 (gmt 0)

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Since this is all new, no-one probably knows the full answer, but I'd venture to say "correct".

Theory being that both of you are at the maximum bid, but your competitor has a better CTR on the ad (probably from before the aff crackdown).

Even if you improve your ad copy it won't make a difference, because your ad will never show, so your CTR can't increase! Kinda screwed up. :-(

-V