How to Find Adwords Bid Gaps?

2 replies
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Has anyone devised a fairly reliable with to determine bid gaps?

Many agree position #1 performs the highest as far as CTR and Total Conversions. But this is disregarding Cost per Conversion (and to an extent, conversion percentage rate).

If say you have three competitors bidding on the same keyword (let's also assume Quality Score is the SAME for you and your competitors)

Competitor A Bid - $2.00
Competitor B Bid - $1.75
Competitor C Bid - $0.75

It is widely accepted that your conversion percentage rate is the lease effected by your ad position - it is mainly dependent on how well your ad is targeted and your 'offer'.

But in this case, which is probably not that uncommon, the cost per conversion is going to be much lower if you bid $0.80 instead of $2.10. Yes, you will probably get less conversions, but the savings in the lower cost/conversion could be re-allocated elsewhere for better ROI.

It seems to me there is a high chance in many cases you have more than one competitor that is striving to be #1. In fact it probably isn't uncommon for their to be an almost constant stream (in higher volume keyword categories) of relatively new competitors to the Adwords market that come in with less knowledge and go for #1 at almost any cost before learning their lessons.

With the bidders in the auction potentially changing or changing their bids as time goes on, you really can't rely on the bids to be stable for any length of time. This would tell me trying to look a small period over time with different average ad positions (by altering your bids during those periods) wouldn't be a very reliable way to find the gap. Sometimes it might work when there are few and consistent competitors I suppose.

#adwords #bid #find #gaps
  • Profile picture of the author winnermarketing
    CTR is the result of many factor includet you BID.
    So, if competitor A (BID=2$) CTR is better than Competitor C CTR (0,75$)
    competitor A will pay less (cost per click) than competitor C!

    The key is to optimize your precess throught many test.

    Free Guide to Make Money Online [Now!]
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  • >> Many agree position #1 performs the highest as far as CTR

    Yes. We all know that the first position gets a relatively higher CTR than each successive position. That's why those doing SEO want the first organic position also. It's been shown and published that is the case. Same for PPC.

    >> and Total Conversions

    If conversion rates don't change no matter the position, that goes without saying. Simply because the CTR is higher in first position, you'll get more sales.

    Whether that produces a positive ROI is another issue. A landing page may be so poor and have low conversion rate that all profits are eaten by the advertising.

    Your example is just that, an example. It really doesn't reflect what typically happens in the real world.

    In the real world, QS will not be the same and vary greatly. But let's assume they are very similar just for argument's sake. I believe this probably happens often for a small group of advertisers. So 20 advertisers will have a QS range of 3 to 10 with a majority (probably 60%) between 4 and 6, which is still huge. But you may have three advertisers bunched together around a certain position with a very similar QS as in your example. Of course, the more competition, the more likely that is to happen.

    In the real world, you would not likely have a bid range that extreme. Those would be bunched up more closely together. In your example, C is the outlier not wanting to bid too high for what may be the "going rate" of $1.75 to $2.

    Let's take real estate agents. Google's tool suggests a bid of over $5. This is to get first page positioning with an average QS. You may get first or near it with a QS of ten.

    Given that industry, I'm sure a significant percentage bid that amount, maybe half of them. The other half is likely split between those bidding more, many up to $10 and some even more while some may bid as low as $1. But the majority will likely be around $5, a range of maybe $4 to $6.

    The flaw is that you assume that your bid is what you will actually pay. In your example, yes, given exactly the same QS, each competitor will pay their bid although I'm not sure about the last one. It will depend on how Google calculates things, my guess being a fourth phantom competitor which is an average ($1.50 in your example with QS of 5).

    Assuming the same conversion rate no matter the position for each competitor (which you know I don't believe since you linked here from a thread discussing that), yes, the cost per conversion will be lower for those bidding (and paying) less.

    That doesn't mean that the one paying $2 is not making a profit. In fact, he may be making more.

    If A has a CTR of 10%, B 8% and C 5%, for every 1000 impressions, he gets 100 clicks and C half that. If they both have a 4% conversion rate, A has 4 and C only 2. Thus more sales. A's cost per conversion is $50 while C's is only $18.75. But, if the product sells for $100, A made a total revenue of $400 and profit of $200 while C was $200 in revenue and profit of $162.50. So which one would you rather be? Would you rather make more profits or have a lower CPA? My assumption of course is the same conversion rate for all which is not real world.

    In the real world, each competitor will have very different QS which will affect not only the cost per click but also the position. Your example shows three competitors in order by how much they bid. A and B can easily be switched if B has a better QS, and it wouldn't take much.

    Your assumption about new competitors wanting to be #1 right away is probably correct. When that happens, the whole dynamics of the auction can change radically. I believe one of my clients has experienced this the last two months. Costs increased by almost a third before just recently gone back down to more historical levels. Thanks to auction insights, I believe I know who it is too.

    I'm not sure what you mean by the gap in bids. I assume you mean the difference between A and B ($0.25) and B and C ($1). You can't find that out because you could bid $1 but pay only $0.40.

    Also, there is typically little gap in CPC between positions. Here's a client's ad group CPC by position over 1.5 years:

    Position 1-1.5 = $0.752, 1.5-2 = $0.749, 2-2.5 = $0.720, 2.5-3 = $0.732 will similar figures down to the fourth position.

    Some groups vary more but in general, there is few big gaps between positions. The auction is very dynamic as you said. Competitors come and go, some try to improve ads to get better results, some change bids often. You cannot say you always have the same competitor below you since you will have different ones all the time due to ad testing and bidding, day parting, budgets and many other things. So one click may cost 50 cents and the next 75 cents. Also, everyone's QS changes ever so slightly each time their ads are showing. It is not static and is calculated to many decimals in the back end. These little differences can really add up over time.

    My question to you is, what do you expect to do with the gap information, if it was possible to determine?

    My best advice is to always test and try to improve your results to get more clicks and more sales.
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