Tools and Strategies for Optimizing Bids and Budgets

Evaluate your keywords' value

The bottom line for any ad or keyword is how much value it generates compared to its cost. To determine the profitability of a keyword, you can track the conversions from that keyword with Google's free conversion tracking tool or google analytics. With this conversion data, you'll know how profitable your keywords are with their current bids and can identify which keywords could be more successful with adjusted bids.

For keywords that show a profit (such as having high conversion rates and low costs), you might try increasing their maximum cost-per-click (CPC) bids. While costs may increase, your ad position could rise and provide more ad exposure, potentially increasing your conversion rate and return on investment (ROI). In some cases, it may make sense to lower the bid for a keyword even if the keyword is profitable; by lowering the bid, you can lower the average amount paid, which may increase the profit margin for that keyword.

For keywords that aren't profitable (such as having low conversion rates and high costs), you might try decreasing their bids to lower your costs. A lower bid is likely to decrease the keyword's average position, the number of impressions and clicks it receives, and as a result, the cost it incurs. Not only can this strategy improve your ROI on low-performing keywords, but in some cases, it can also free up part of your budget to invest in more valuable keywords.

Optimize for ROI

• Use conversion tracking to track your cost-per-conversion. The cost for each conversion should be less than the amount you receive for that conversion. For example, if you receive $10 for each sale but spend $11 on clicks to get that sale, you should optimize to improve your ROI.
• Use advanced ad scheduling if your campaigns make more sales or other conversions during certain times of the day. By using the advanced mode in ad scheduling, you can automatically increase your CPC bids during times that are most profitable for you, and decrease your bids when it's less important that you appear in a high position. This is a great way to reduce your costs during the days and hours when you're less likely to convert users into customers.
• Reallocate budget from campaigns that don't convert well to high ROI campaigns that are limited by budget. If a campaign is not limited by budget (isn't consistently meeting its budget), then allocating more budget to it will have little or no effect on that campaign.
• Test your bids adjustments until you achieve your optimal performance. You may lower your bid too much and see conversions go down significantly, or you may raise it too much and see no changes in conversions. Through testing and measuring, you should be able find the amount that most effectively reaches your advertising goals.
• Set Display Network bids so you can bid separately for ads on the Display Network. If you find that you receive better business leads or a higher ROI from ads on Display Network sites than on search sites (or vice versa), Display Network bids let you bid more for one kind of site and less for the other.
• Use the Conversion Optimizer to get more conversions at a lower cost. The Conversion Optimizer uses conversion tracking data to get you more conversions (like sales, leads, and signups) at a lower cost. You set the maximum cost-per-acquisition (CPA) you want to pay for a sale or lead, and the tool adjusts your CPC bids to get you as many profitable clicks as possible. This can help you minimize unprofitable spend and maximize your investment on keywords that produce results.
• Use the Keyword Positions report in Google Analytics to help decide how to adjust your keyword bids. This report in the "Traffic Sources" section shows in which positions your ad performs best. If you learn that your ad actually converts better when it's at a lower position, consider adjusting your bids to achieve the best performing position.