Managing bids in PPC search campaigns involves a great variety of factors and issues, which makes it rather complicated.
This blog post aims to address this problem, and summarises a five-point framework that can be used as a basis for making bidding judgements and decisions, based on my experience of working on campaigns in multiple search engines, including Google, Baidu, Bing, Haosou, Naver and Daum.
The framework consists of five factors: spending, target, keyword, position and quality score.
1. Spending
PPC stands for “pay per click”. This means that whenever a user clicks on your ad, you need to pay.
Our clients will all have a PPC budget for a certain period, for example 3, 6 or 12 months. The budget can be further broken down month by month.
Ideally, for each month, the client would want the campaign to be kept running every day, and for the whole month’s spending to be no more than – but as close as possible to – the monthly budget.
In this eventuality, we would evenly allot a portion of the monthly budget to each day, and manage campaigns based on the daily budget. As long as each day’s spending follows the daily budget, monthly spending can easily be controlled within the monthly budget.
Sounds simple, right? However, the reality is that web traffic moves up and down on a daily basis. Correspondingly, spending also fluctuates every day. In addition, daily spending is allowed to be a certain percentage over the daily budget (e.g. 20% in Google AdWords). Such a situation means that it is important to check campaign spending every day.
When you are optimising bids in a campaign, you must always keep the overall budget in mind. If your campaign is over-spending, although you will want to bid highly for well-performing keywords, you may need to lower your bids in other areas of the campaign so that you do not exceed the budget. If your campaign is under-spending, you should look for opportunities to raise your bids so that you get more traffic and maximise your budget.
When you have campaigns running in multiple countries, it is likely you will have a budget per country – but it is worth taking an overall view of your campaigns, and being prepared to move budgets between markets to maximise performance globally.
2. Target
What is the purpose of your PPC campaign? What do you want to achieve? What is your target? Your target is a very important factor in campaign optimisation, and directly influences how you should bid on keywords.
Understanding your target, or goal, allows you to identify which keywords are performing well and which keywords are performing poorly. The same keyword can be classified as high-performing based on one target, but low-performing based on another.
For example, in the table below, if achieving a high click-through rate (CTR) is your target, KW1 is a low-performing keyword and KW2 is a high-performing keyword; but if achieving a high conversion rate is your target, KW1 is good and KW2 is poor.
Obviously, high-performing keywords should have higher bids to keep themselves in the top positions, whereas low-performing keywords should have lower bids and low positions. Therefore, different targets and goals will mean you will need to bid on the same keywords differently.
There is one extra point that needs to be mentioned here. When you are looking at your target to decide whether a keyword is good or not, you need to consider relevant KPIs as well. For example, in above table, if a high CTR is your target, KW3 has a CTR of 100%, much better than KW2 with 2%. However, KW2 has 30 clicks, whereas KW3 has only 1. Suppose that both keywords have similar positions – obviously KW2 can deliver much more traffic than KW3. Overall, KW2 is more valuable, and therefore should have a higher priority to be maintained at a top position.
3. Keywords
Keywords are the foundation of PPC. Campaign structure, ad copy and landing page content are all created with keywords in mind, and it is keyword searches that trigger ad exposure. And as mentioned in the previous section, keywords need to be classified as high-performing, medium-performing or low-performing in accordance with their target KPI performance. More importance will obviously be given to high-performing keywords.
In international campaigns, you will of course have different keywords for each country/language you are targeting but you need to bear in mind that keyword bidding strategies will also need to be different – there will be different keyword behaviours and patterns for each market so bidding needs to be done individually for each market.
Overall, bidding/optimisation at keyword level is very important, and cannot be ignored.
4. Position
The reason people conduct PPC campaigns is because they want their ads to display in the top positions in the SERPS, giving them more exposure and enabling them to attract more searchers to their landing pages.
Therefore, position is a key performance indicator in PPC. As discussed above in the Target section, high-performing keywords should have higher bids to keep them in the top positions, whereas low-performing keywords should have lower bids and low positions.
However, if a high-performing (or low-performing) keyword is already in position 1 (or below position 5), there is no need to raise (or lower) its bid.
Ad position interacts with keyword performance, and also with bidding. Keyword performance affects the ad position, yet ad position influences keyword performance. Ad position gives us a clue on whether we should raise or lower a bid or keep the bid unchanged, and the bid will influence ad position in turn.
5. Quality score
On Google, an ad’s position is decided by Ad Rank.
Ad Rank is calculated by multiplying the CPC bid with the ad’s Quality Score.
“CPC bid” refers to the maximum bid that you are willing to pay for a given keyword. “Quality Score” is a score that Google gives your ad and is based on: a keyword’s CTR; the relevance of the keyword, ad and landing page to the search term; your account’s historical performance; and other relevant factors.
Other search engines may use different terms to quality score (e.g. “quality degree” in Baidu, “quality index” in Naver), but they have a similar meaning. The way that Ad Rank is calculated is also similar across search engines.
Let’s look at another example to illustrate how quality score affects bidding. In the table below, suppose that keyword KW4 has a quality score of 5. You place a bid of $4.00 for it and, with an Ad Rank of 20, your ad is placed in position 1. Now imagine that your quality score is 10. You still want your ad to be in position 1, so how much are you going to bid? You know that having an Ad Rank of 20 can place the ad in position 1, so now you just need to place a $2.00 bid – half the previous bid.
The above example shows that by improving your ad’s quality score, you can achieve the same performance with a lower bid and thus a cheaper cost.
It is important to note that not only does quality score influence position, but position also influences quality score because a higher ad position generally leads to a higher CTR, a key factor in determining an ad’s quality score.
There are a variety of other tactics you can utilise to improve your quality score, such as ad extension implementation, ad copy writing up or modification, landing page layout and content organisation or refinement, and A/B testing.
In summary
The framework clearly shows us that when making a bidding decision, you have to take these 5 key factors into account, and have a good balance between them.
One point needs to be emphasised here: there are so many uncertainties involved in web traffic and PPC that nobody can tell you which bid is best, or which performance result is best – this will vary from campaign to campaign, and day to day. But you can always drive campaigns to perform better and better, and test different things to see what happens. That is what optimisation actually means.
Sam Chen
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