At the Auction – Behind the Scenes of PPC

bidHave you ever gone to an auction and been amazed how someone can rattle off the verbal race, keeping up with buyer’s increasing bids? Not only do they encourage the audience to keep raising their bid to beat the last guy, they entice you with details of the product— all true details, which makes you feel more and more like you have to walk away with that item.

In a similar way with PPC, an auction is going on behind the scene, or screen, every time you search for a product, service, study for a class, or just look up information to satisfy your curiosity. Instead of taking a couple minutes per item, it takes only the click of the enter key for the PPC auction to take place.  Unlike the auction where you raise your bidders card to signal interest, the winner in a PPC auction is the “seller” who has a bid that is only enough to beat the next lowest bid. There are several things that are taken into consideration to determine the winner of an auction but I will focus on bids and the strategies that are used with any search engine.

PPC Campaign Strategies

No matter which auction strategy you use or what type of campaign you run, you will set the limit of how much you are willing to pay for each auction, or maximum bid. There are three bidding strategies depending on what you focus on, whether it is getting clicks, impressions, or conversions. If you want to focus on getting clicks on ads to drive traffic to your website, the strategy is called cost per click or CPC. If it is getting impressions to get your ads to show and promote your brand, this is called cost per thousand impressions or CPM, which is used strictly with display ads. If your focus is on conversions, it is called cost per acquisition or CPA.

You can set your default bids at the campaign level or the ad group level. This will be your base bid but you can change the bids at lower levels as needed, to improve results. You may think the higher the bid, the better the results, but in all actuality, the opposite is true in some cases.

The Cost Per Click (CPC) Strategy

I’ll use the CPC strategy as an example of adjusting your bids to maximize your results. Let’s start by setting a default campaign bid at $1.00 for each time a user clicks on one of our text ads. When we look at the data after a week, we see that some campaigns have performed better than others. So we increase the bids on the slower campaigns, to say $1.50 per click, to try to bring their performance up to the higher performing campaigns but all we see is more money being spent without any significant increase in clicks or even a decrease. This is an example of the opposite being a better option, that is instead of raising our bids try lowering them and working on some of the other parts of the auction pieces, such as the enticing details to improve your results.

Digging even deeper into the account, if we look at how each ad group is performing, we can go down to the roots of the campaign at the keyword level to adjust bids. Even down this far from the top of the tree, so to speak, the keywords use the campaign default bid when they are added. In the same way as with the ad group adjusting, we can adjust the keyword bids up or down to achieve the results we are looking for.

It all sounds so simple but it is not just raising or lowering bids. There are various statistics we have to take into consideration, as to which direction we go, how big of a change we make, or even pause or remove a keyword or pause an ad group.

The Cost Per Thousand Impressions (CPM) Strategy

With the CPM bidding strategy, you bid for how often your ad shows on the Display Network. You set your bid to the maximum that you are willing to pay for every 1,000 times your ad shows, to get your name in front of users. Google will treat CPC and CPM bids equally, by that I mean they will take the CPC bid and see how it calculates for 1000 times. Just to keep figures easy to work, with we’ll say you are willing to pay $50.00 for your CPM bid while the competition is using CPC strategy and is bidding $0.05 per click. They are considered to be equal and the enticing details come into play.

The Cost Per Acquisition (CPA) Strategy

The final strategy I am going to cover is CPA, cost per acquisition or conversion, which is used when users/customers are likely to take an action on your website that you are tracking conversions on. There is a little more in the setup of the CPA strategy because you have to setup Conversion Optimizer along with some form of conversion tracking, whether in AdWords or imported from Analytics. Conversion Optimizer uses your historical data to calculate the optimal CPC equivalent every time your ad is eligible to show. As with the other strategies, you can set a maximum CPA bid that you are willing to pay or a target CPA bid which is an average amount you feel comfortable spending. Using your historical data through Conversion Optimizer, Google will give you a starting bid and that is monitored and adjusted as data is collected.

As you can see, there are three very effective strategies to work with, depending on your needs. Whether you are looking to bring customers to your site or get your brand out to users when they are likely to complete a conversion on your site, the tools are available to help. Now get your bidders card out and start waving it to get those searching auctioneers’ attention. Happy bidding!


– Gary Harvison, PPC Manager