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.