CPC Inflation?

[Mark_A]

Your competitors are running ads so you decide you need to also.

You base your bids such that your average position is 1 to 1.5, i.e. you want to list higher than your competitor.

In response after a couple of weeks, they raise their bids to list higher than you.

You now have a choice, increase your bids again or be happy rank below your competitor.

Is this what is occurring? and is this why the CPC for very niche keyterms is now so high when logic would suggest that they are niche terms and wouldn't be worth a great deal to advertisers?

Are we all bidding ourselves up?

[Shepherd]

Are we all bidding ourselves up?

Yes.

And, if you don't you'll get "quality scor(h)ed". You must comply.

[Mark_A]

I have reached a point where I am not sure the CPC on some of our target search terms is justifiable, in part because conversions are not sufficient.

But if I walk away I leave the field for my competitors to gather all the visitors at a much reduced cost. Well just my walking away won't do that because there are a number of competitors.

[Shepherd]

I get it. We cut our adwords spend late 2016 from a few hundred thousand monthly down to less than a thousand a month. adwords for us now is simply for branding. Competition is one thing, if it were a straight auction we would be more aggressive. Our niche has a business funded by google and when google started adjusting the auction with the quality score we felt is was no longer a fair ecosystem.

On top of that, the customers we did get from aggressive advertising on google were the most high maintenance, PITA customers we had ever seen. That's not google's fault, just an observation.

[NickMNS]

@Mark_A

But if I walk away I leave the field for my competitors to gather all the visitors at a much reduced cost.

Don't walk away completely. Set your bid at the highest level you can endure, either break-even or some slightly lower level so you can keep some margin. You probably wont get first position, but if your competitor wants first position they will need to out bid you. Now assuming you share a similar cost structure, your competitor will need to take a loss to keep the first position. Now if the assumption turns out to be true then after some time your competitor will back off. If your competitor doesn't back off then you will need to look at reducing costs or optimizing your marketing.

Note that this becomes a game of chicken, because it only comes to an end when one of you pullout. Also note, that you will likely cannibalize a part of your organic sales, so be sure to account for a loss in organic sales in your overall break-even calculation. One final point, this assumes that there is no significant difference between your quality score and your competitor's. If your competitor is benefiting from high quality score and your not then they may be paying less to for the first position, in which case the above strategy will fail.

[Mark_A]

What happens if I just back off my CPC bids until I average in position 2 or 3 or 4?

[RhinoFish]

Your CPC can drop off substantially, but it depends on your competition's bids, and how your quality compares with theirs.

Google's Chief Economist Explains the Adwords Bidding Process
[youtube.com...]

Video is from 2011, but it is still very relevant.

[Mark_A]

@RhinoFish, thanks for that, interesting video. I see CTR in my adwords interface but I don't think I see the other elements of Quality Score.

[NickMNS]

@rhinoFish, that is a great video, I had seen it before but it is always good to watch again as a refresher. One thing that struck me this time, at the start he says that they are balancing between, Users, Advertisers and Google. Where are the publishers?

Also, I just found this. The return of Hal, nearly the same video published Jan 2017, but with some added and updated info.
[youtube.com...]

[buckworks]

Remember that the goal here is to put money in your own pocket.

Don't be driven by what the competition is doing (or seems to be). Figure out ads and bids that are cost-effective for YOU and stick with them. If your ads ride lower than someone else's, so be it.

What happens if I just back off my CPC bids until I average in position 2 or 3 or 4?

That's generally what I recommend. Your campaigns have a better chance to be profitable if you're not obsessed with the top position.

If you're not using them already, learn to use the automated bidding tools within AdWords. They can adjust your bids up or down to keep your rank within a specified range.

Work on getting your quality score up, and also be more selective about who sees your ads. Negative keywords are your friend.

[Mark_A]

@buckworks, thanks for that, it makes sense to do what is justified rather than chasing first position. I am a bit suspicious of google's automated bidding tools, I wonder whose benefit they were made for? That said I will have a look.

As for negative keywords, I check daily for new ones that could refine our reach, our targeting is fairly good, lots of three word broad match modifier and exact match keywords.

[buckworks]

That sounds good.

Have you been testing to find ways to improve your CTR? If yes, what sort of testing?

[Mark_A]

@buckworks I haven't really been doing testing no.

I did over a few weeks focus on adding many very targeted 2 & 3 word key terms, using broad match modifier or exact match. At the same time I removed or replaced many broad match key terms which were bringing the most irrelevant visitors. Plus I check daily for irrelevant visitors and where suitable add negative keywords to keep it clean.

Overall CTR is 9%, but with the less common long tail targets we often achieve 66 - 100% CTR.

What sort of testing did you have in mind?

[buckworks]

Mostly I was thinking of testing different ad variations to see if any get a better CTR than what you're already getting. Add a couple of new ads to an ad group, watch for a few days, pause the ad that has the lowest CTR. Then do it again. Over time that can make a useful difference to the average CTR of one's campaigns. Sometimes you'll find that the same ad will perform quite differently for this query versus that. Consider creating new ad groups to focus on high-performing ad/query combinations.

I'd say your CTR is already pretty good, but is that because of how good your ads are or how high you're bidding? The real win here is if you can come up with ad and query combinations that get a strong CTR even with lower bids.

[RhinoFish]

"I see CTR in my adwords interface but I don't think I see the other elements of Quality Score."

Hysterically, many of these important columns are defaulted to off.

Hysterically further, the new AdWords interface fits roughly half as many columns of info on the screen, and for analytical work in a number rich platform, obviously this is an interface "improvement" of epic proportions![/Sarcasm]

And apparently I wasn't done with my biting commentary...

Check this out:
[trevellyan.biz...]

Hey Google, inverted text, really?
Try googling "readability of regular or inverted text", you'll see that you recommend the article I linked to above.[/Finally, It's Over]

[Mark_A]

It doesn't surprise me Google doesn't provide info. to evaluate quality score.

I remember when visitors from google organic SERPS included the keyword searched for in the URL so you could easily see what they were searching for when they found your page. A wholly more innocent time.