AdWords Bidding and Budgeting

Overview of Bidding

Introduction to AdWords Bidding

How AdWords Bidding Works

A bid is the amount you're willing to pay per click, per thousand impressions, or per acquisition. Each time your ad is eligible to appear, an auction takes place among your ads and all the other eligible ads. Your bid is one of the factors that determines whether your ad shows, and in what position.

The most common type of bid is a maximum cost-per-click (CPC) bid. When you use CPC bidding, you pay only when someone clicks on your ad.

 Raising your CPC bid can improve your ad's position, and lowering your bid can decrease your ad's position. Keep in mind, however, that ads are not ranked solely by their bid.

• Ranking on the Search Network:
  Ads are ranked on search pages based on a combination of the matched keyword's CPC bid and Quality Score. Quality Score is determined by the keyword's clickthrough rate (CTR) on Google, relevance of ad text, historical keyword performance, landing page, and other relevancy factors. Having relevant keywords and ad text, a high CPC bid, and a strong CTR will result in a higher position for your ad.

• Ranking on the Display Network:
  Ads are ranked on Display Network pages based on the ad group default bid (when there aren't more specific bids that apply), the ad's past performance on this and similar sites, and the landing page quality. However, if you've set a Display Network bid or a bid for a specific placement, these will overrule the ad group default bid when your ad runs on the Display Network or the placement you've selected. These more specific bids affect your ad rank, so you might consider increasing bids for placements on which you'd like to rank higher.

Visit our Optimization Tips page to read more about account optimization. You'll learn how to maximize performance for ads and improve your ad's position without having to raise your bid.

Bidding Options

Depending on your advertising goals and how closely you want to monitor and manage your bids, you can choose one of several different bidding options.

Focus on clicks: Cost-per-click (CPC) bidding

In campaigns using this bidding option, you set a CPC bid for each ad group or keyword in your campaign. Your CPC bid refers to the amount you're willing to pay for a click on your ad when the ad appears on Google or one of our partner sites.

With CPC bidding, you pay only when someone clicks on your ad. CPC bidding is recommended if you're mostly interested in getting traffic on your site. You have two options for CPC bidding:

• Automatic bidding: You set a daily budget, and AdWords works to bring you the most clicks possible within that budget. If you like, you can set a CPC bid limit to ensure the AdWords system doesn't bid more than a particular amount.
• Manual bidding: As with automatic bidding, you pay only when someone clicks on your ad. However, this option lets you control your own maximum CPC bids. You can set bids at the ad group level, or for individual keywords or placements.

Focus on impressions: Cost-per-thousand impressions (CPM) bidding

In campaigns targeted to the Display Network, you may choose the CPM option. Instead of bidding and paying only for clicks, you can choose to bid for impressions on your ad, and pay for every thousand times your ad appears. If you're mostly interested in branding and getting ad visibility, we recommend choosing this option.

As with manual CPC bidding, you can set bids at the ad group level, or for individual placements. For example, if you find that a particular placement is more profitable, you can raise your bid for that placement.

Note that when CPC and CPM ads compete with each other in the same Display Network auction, the AdWords system uses a system of effective CPM, or eCPM, to compare and rank the ads. For cost-per-click (CPC) ads, the AdWords dynamic ranking system considers the bid, clickthrough rate (CTR), and other relevance factors. The resulting number is the ad's eCPM, or effective cost per 1000 impressions.

CPM ads are ranked for display according to their CPM bid, competing with other CPM ads and with CPC ads. A CPM ad always occupies the entire ad space, with either an image ad or other multimedia ad, or an expanded text ad. For this reason, you might wish to bid higher for CPM ads than you would for CPC ads.

Focus on conversions: Conversion Optimizer

This bidding option enables you to specify a maximum cost-per-acquisition (CPA) bid for each ad group in your campaign. The Conversion Optimizer uses your AdWords Conversion Tracking data to get you more conversions at a lower cost. It optimizes your placement in each ad auction to avoid unprofitable clicks and to get you as many profitable clicks as possible.

Using historical information about your campaign, the Conversion Optimizer automatically finds the optimal equivalent cost-per-click (CPC) bid for your ad each time it's eligible to appear. You still pay per click, but this feature can decrease the need to adjust your bids manually.

Your campaign must meet the following requirements in order to begin using the Conversion Optimizer:

• AdWords Conversion Tracking must be enabled.
• The campaign must have received at least 15 conversions in the last 30 days. The Conversion Optimizer requires this conversion history in order to make accurate predictions about your future conversion rate.
• The campaign must have been receiving conversions at a similar rate for at least a few days.

Note: Since you set a maximum CPA with the Conversion Optimizer, it's normal for your actual average cost per conversion to be lower than the maximum CPA bid you set.