How Does Pay Per Click Bidding Work?

Guest Post by Marianne Pratt

Pay per click (PPC) advertising seems pretty straightforward.You target wisely, select tempting keywords, create an irresistible ad, hot prospects click on your ad, you only pay for the ones that “click through” and, hopefully, you convert some to buyers.

But then there’s this bidding thing.Unlike traditional advertising, with pay per click you have to bid on placements.It’s like an auction, and competitors might outbid you.That seems risky.But many thousands of businesses use PPC advertising every day, so obviously it works.

How much should you bid?

  • Essentially, ad content determines where your ad will appear and bidding determines where it will appear on the page.Google placement actually depends on both your bid and your click-through-rate (CTR), so ad quality is critical.
  • Higher dollar-value conversions can support higher bid amounts, so use your probable (or known) click-through and conversion rates to pick sensible minimum or maximum bid amounts.Research can also help identify typical bid prices for your keywords.
  • Yahoo’s minimum bid is 10 cents, Google is 5 cents and Bing one cent.
  • Target carefully so you don’t waste placements and money.

Manual versus automatic bidding

  • Manual bidding provides the most control.You can set maximum bids for individual keywords and also ad groups.Compare price vs. volume to determine your bids, and start above the minimum to get faster results and feedback on ad quality.
  • Beginners should use automatic bidding.You can set a daily budget and a cost per click (CPC) bid limit per keyword, and the system will try to provide the most clicks within those parameters.It will also adjust bid amounts between keywords, ad groups and placements based on your set CPC limit.
  • If automatic bidding results are poor (your ads don’t actually appear), remove or raise the maximum limit, increase your daily budget or switch to manual bidding and a higher bid.

Bidding strategically

Bidding success sometimes depends on increasing your budget, but what you really need is clever strategy to get the best placements and outfox the competition.

  • Be sure generic keyphrases match exactly, or use “broad match.”
  • Greater keyword specificity typically generates the strongest leads.
  • Over-bidding could waste money, but bid too low and you’ll get lousy position.
  • Position is critical, because 75% of online searchers don’t scroll past the first page.But being #1 probably isn’t worth the extra cost.Positions 4-7 usually cost less than 1-3, and even with #8-10 you’re still on page one.

Bing, you say?

Sometimes viewed as the poor stepsister of Yahoo and Google, Bing does have its own charms.You’ll probably get far fewer clicks for a given keyword, but bid amounts arelower, too.There’s less competition, and Bing tends to drive higher conversions.So aim for that #1 position after all, and bid on broader keywords because you need to generate volume.

Get help

  • Choosing keywords and bid amounts takes lots of thought and research, but there are plenty of online tools you can use.
  • You can also use bid management software to monitor all your PPC advertising, helping control costs and capture valuable tracking data.
  • Call a pro.Online marketing experts won’t waste your time or your money.They can help you choose keywords and craft ads that will make the most of your PPC advertising, and closely monitor your results.

Pay per click bidding can be very cost-effective, depending on your goals, business type, competition and budget.What works best on one search engine doesn’t necessarily work on another, so you’ll need a flexible bidding strategy.And remember to monitor your competition as well as your own results.

Photo Courtesy of Flickr user Jpmatth

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