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I went throught the price - ranking tutorial on the G site and I can't see why I would use a bid management system to manage keyword bids,
given your actual CPC =
(competitor below max bid * CTR) divided by your CTR
You'll probably do better to ask less general (teach me) questions. People like to help but probably don't have the time necessary to explain all the ins and outs of basic functions.
Actual CPC's are determined by CTR and ranking. What BO (budget Optimizer) supposedly does is change your bids to maximize clicks based on your words and search traffic and (I suppose, this is pure supposition) how those words performed for other advertisers in similar markets with similarly worded ads.
2 Problems with that. CTR is not a good measure (for us) of success, ROI is. So optimizing on CTR IMHO misses the mark. (I can instantly get lots of non-relevant traffic: "Look Here Free stuff-sex sex sex") And secondly BO uses Google's Estimated Bid "machine" (the actual name escapes me) to, in part, base its decisions on. I don't remember the things name because I never use it because the few times that I did it was never, never, never even the slightest bit close to reality. ( I think the I-Ching might do better!)