I've been reading guides and forums but after a few days I still haven't come across a clear explanation as to how exactly I'm charged. Also I really want to understand how much to bid if I want to target specific positions. Hoping someone here can answer any of my following two questions:
Question one:
Does bidding work like ebay in a sense? e.g. if my max bid is $1.00 and the second highest bidder is $0.50, then I would paid $0.51 and be ranked pos.1?
Also how does quality score fit into the equation? All my ads have a QS of 7/10 - is that good / reasonable?
Question two:
I notice when I first setup my adwords account and put bidding on automatic, all the bids were something high, like $1.24 CPC. But that immediately got me into position #1-3 for all my ads
A few days later (today) I decided to play around with bids and set to manual bidding. Now, the adwords interface tells me 'first page bid estimate' is something low, like $0.25. So I put in a higher bid like $0.50, hoping to get onto position 1. What I don't understand is that before, when bidding was set to Automatic, adwords bid $1.20 for ALL my keywords (side question: seems suspicious, why are all my keywords at the same auto bid?) but as a result, I was in position 1. Now, on manual, if I set things to $0.50 which is double the estimate for page 1, I'm never in the top few positions, and sometimes not even on page one! Does this mean either: 1) I should leave on automatic, since a newbie like me can't outwit the default algorithm, or 2) I should place much higher bids, like $1.00+, even though the estimated first page bid is $0.25?
Thanks in advance
There's an excellent video on Youtube that explains the process:
www.youtube.com/watch?v=K7l0a2PVhPQ
It will explain how QS fits into the equation. I think a QS of 7 is fairly good. In fact, it is likely the average QS. Always try to improve however.
The main component of QS is CTR and is relative to other advertisers for that keyword at that position. In other words, you could be in 5th position and have a QS of ten. It also means that if you have a QS of 7, there are advertisers with better CTR than you have. Therefore, your ad needs to improve to get higher CTR. If you have QS of 10, you are at the top (or near the top) of the mountain for that keyword.
I don't use the Automatic bidding so I can't really answer the second question. I believe the way AB works is they will give you the highest possible position given your daily budget. Since you paid $1.20, you know now that's what it takes to achieve that position. You set your bid to something much lower so of course you end up in lower positions, even off the first page.
I have two suggestions. First, bid as high as you are willing to pay and still make a profit. No sense in getting into bidding wars if you can't afford it. Second, CTR is king. Test new ads to try to get higher CTRs. You'll be rewarded with higher QS and lower costs. A third suggestion is to track everything. Which keyword/ad combination gives best ROI and at which position? First is not always the best. Sometimes second, fourth and I've even seen eighth being where you want to be.
But it's more complicated now. Google's formula now considers your bid, your Quality Score, and the next advertiser's Ad Rank.
This means you can bid $2, he bids $5, and your ad both appears above his and you pay much less than him.
The tone of the above reply is correct: CTR is very important. The overall quality is also very important: good keywords, good ad, and good landing page. Google reviews the landing pages (the reviewers are humans).
How to tell if you have good Quality Score (QS)? Look at the difference between your bid and your cost-per-click. For example, your bid is $2 but you only pay $0.12 for the click; there is a huge difference, which means you have high QS. If the bid and click are nearly the same, then your QS is not very good.
It still works that way. Maybe AWA can confirm.
> How to tell if you have good Quality Score (QS)?
Just look at your keywords in your account. The new interface can show the QS as x/10 instead of mousing over a magnifying glass.
As far as if your actual cost and your bid are close being an indication of good or bad QS, that's not true. There is no relation. Watch the video, do a few mock calculations and you'll see. If you pay $0.49 when bidding $0.50, it's because the advertiser below you was bidding at least $0.48
QS has nothing to do with your bid or your position. Your ad's rank is based on QS AND your bid.
LucidSW's reply is no longer correct. The current formula is more complex.
But I don't want to over-complicate things for others. Adwords is hard enough as it is without introducing more complexity, that's why this and other forums are filled with advertisers looking for help. So for the sake of keeping things simple, let's just say that paying one cent over the next lowest advertiser's bid is essentially correct.
I'd add: Put efforts on improving quality. That includes quality of keywords, ads, adgroups, and landing pages.
