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CPC & eCPC

CPC & eCPC

Contents:

 

AdWords – CPC & eCPC Bidding

This guide is a detailed look at CPC & eCPC bidding, if you are unfamiliar with this bidding technique you may want to read our introduction to bidding strategies first.

What Are Auctions?

Before we explore CPC Bidding in more detail it is first worth explaining a little bit about how auctions work and what they are. The auction is the process that occurs with each search performed in Google (the display network works slightly differently to this).

How Do Auctions Work?

The auction determines what ads show and where they show, when someone performs a search within Google. There are three steps in this process:

  • The search is matched to all ads whose keywords match the search term (based on keyword matching).
  • Google then filters all ads that are ineligible for any reason (such as target location not matching, ads that are disapproved, etc).
  • Google will then show (from the remaining ads) those that have sufficiently high Ad Rank (Ad Rank is a combination of your maximum bid, your ad quality and the predicted impact of any ad extensions that you may have.

Auctions will fluctuate in what ads are shown to users based on the competition at the time of the auction. It is completely possible to pay less for a higher position than a competitor if your QS is higher, meaning that unlike a traditional auction your maximum bid is not the single determining factor in where your ultimately appear in the paid SERPs.

You only pay the minimal required amount to hold a position in ad auctions and you will not be charged (when using a CPC Bidding model) unless someone actually clicks on your ad.

What is CPC (Cost Per Click) Bidding?

CPC (Cost Per Click) bidding is the default and most basic type of bidding available in AdWords. With this bidding method you are able to manually set the maximum bid at ad group or keyword level and AdWords will use this as an upper limit on what you will pay for a click.

Google uses the maximum CPC along with Quality Score to determine the Ad Rank, but more often than not you will pay less than the maximum CPC for a click. Advertisers pay just enough / the minimum required to beat the Ad Rank of the advertiser with the next highest Ad Rank.

Pros and Cons of CPC Bidding

CPC bidding although basic, actually provides the advertiser with the highest degree of control over what they pay than any other bid strategy. Google automated bidding can be unpredictable or inaccurate, especially when dealing with small data. Manual CPC bidding puts all of the control in your hands and thus requires some skill or an overarching strategy to be most effective.

If you are working with CPA targets or ROAS (Return on Ad Spend) / ROI (Return on Investment) targets, you can use spreadsheets and formulas to determine the CPC’s programmatically.

Pros

  • Provides the highest level of advertiser control over your bids
  • Provides granular control over your bids
  • In the hands of an experienced advertiser with time of their side, manual bidding is typically the most effective bidding method
  • It is as accurate as the advertiser can make it

Cons

  • Requires more work, time and experience than automated bidding strategies

eCPC (Enhanced Cost Per Click) Bidding

Enhanced CPC enables Google to up your bids during auctions when the algorithm determines that the click is likely to lead to a conversion or a sale.

To provide an analogy of this tool; if you were polishing shoes on a stand in a busy high street, you would be more likely to spend time trying to convince someone with shoes that can be polished rather than someone with sandals.

The same is true in AdWords, where Google see’s the user as potentially more likely to convert, it will increase your bids to try and ensure you get that user to your site. This is a form of automation, but the amount of automation is about as small as it can be.

Facts About Enhanced CPC Bidding

  • Google considers, time of day, device, location and device among other factors when trying to determine whether a user is more or less likely to convert.
  • The Mobile bid adjustment is taken into account when raising bids to drive conversions.
  • CPCs can be increased up to +30% when using enhanced CPC’s and this is applied after any bid adjustments.
  • CPC’s can be reduced by more than 30% when Google does not think the user is likely to convert, ensuring that you pay less for users who are less likely to convert.
  • The default conversion metric used is ‘converted clicks’; this can be changed to ‘conversions’ if you prefer that this metric be used instead.
  • If your ad rotation settings are set to ‘optimise for clicks’, then you chose to use enhanced CPC, your ad rotation settings will be changed to ‘optimise for conversions’.

Pros and Cons of eCPC Bidding

Pros

  • Provides the a very high level of advertiser control over your bids (second only to manual CPC bidding)
  • Provides granular control over your bids
  • Automation reduces workload to a small degree
  • Automation allows your bids to be more highly optimised (in theory, than can be achieved manually)

Cons

  • Requires a similar amount of work as manual CPC bidding
  • Loss of control over specific bids
  • Potential for poor bidding where volumes of account or keyword data are very small

Setting The Right Bid Value

The image below shows how this looks in AdWords when making a new campaign and choosing the bid strategy:

Setting The Right Bid Value

But what value should you set your bids to?

A Formula for Bids

This depends on your goals and account data if you have any… If you are CPA driven and have an idea of what conversion rates are likely to be and their value, you can easily set bids based on this:

Conversion Rate * Conversion Value = Break Even CPC bid

Or with a ROAS target (using the same information as above) if you wanted to achieve a 150% ROAS, you would divide the result by 1.5:

(Conversion Rate * Conversion Value) / ROAS Target = Appropriate CPC bid

Other than this mathematical approach or if you do not have approximate conversion rates available you can also use a number of tools and data provided by Google:

  • Bid Simulator
  • Keyword Planner
  • First Page Bid Estimates

With new accounts or new categories of keywords there will always be some degree of trial and error before you can reach an optimal level of performance.

Other factors to consider are things like budget, for accounts with small daily budgets of $50 for example, be aware that a $5 CPC will yield 10 Clicks per day if the Max CPC is reached.

Quality Considerations

Also be aware that lowering CPC’s in some cases can reduce traffic quality… The adage of ‘you get what you pay for’ is true for AdWords. You may find that buying traffic at $0.20 per click reduces the conversion rate making it less viable than more expensive traffic.

Conversely, higher bids can improve your ads position, higher position ads often see more qualified users landing on your site and this can be coupled with higher consumer intent and better conversion rates. Hence trialling your ads in different positions and at different bids can also provide insights and allow for more strategic account expansion.

What Level to Set Bids At

At what level you set your bids should be more than a personal preference, where you set your bids should be reflective of a number of factors…

If you have a great account structure with just a few closely related keywords in each ad group, managing bids from the ad group level will be more effective. If however you have a lot of keywords per ad group or they are a mix of high and low value, you will benefit from managing these at the keyword level.

There are other factors such as; level of experience, time available to manage the account, the amount of data the account generates in terms of clicks and impressions, etc. Again, you should always align your bidding strategy to your campaign goals.

Ad Group Level Max. CPC

This is the easiest way to manage your CPC bids but provides the least amount of control over your bidding.

Keyword Level Max. CPC

Keyword level bidding provides the most granular control over your bids, but this is more management intensive… If you have 1,500 keywords across 150 ad groups you will need to set bids for 1,500 keywords rather than 150 ad groups.

Display Level Targeting Level Max. CPC

Setting bids at the targeting level on Display Network campaigns allows the most amount of control over your bids and targeting.

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