AdWords Optimization Tips: Managing and Optimizing Bids

Welcome back to our series on AdWords Optimization Tips. A number of our readers have written in to ask about managing and optimizing their bids for best performance, so that is the topic we'll address today. Please note that some of today's tips are directed towards readers who also use Google Analytics, while others are general tips for all AdWords users.

When you are optimizing your bids, you should test how adjusting your bids and changes in your ad ranking affect your return-on-investment (ROI). Below, we cover a few tools and tips that can help you measure these results so you can make the best decisions for your campaigns.

AdWords Keyword Positions report from Google Analytics

If your AdWords account is linked to a Google Analytics account, the easiest and most effective way to optimize your bids is to use Google Analytics. (You can find out how to link the two accounts here.) You can use the Google Analytics Keyword Positions report in the Traffic Sources section to see where your AdWords ads appear on Google search results pages as well as in which position your ad performs best at in terms of total number of visits, conversion rates, etc. To access this report, sign in to your Analytics account, then go to Traffic Sources > AdWords > Keyword Positions. Positions T1 through T3 mean your ad was promoted to the top of the search results page. Positions 1 through 8 indicate placement or location in the right-hand column of ads on the first page, with 1 being the top position, and so on.

You might learn from this report that your ad actually converts better when it is at a lower position than a higher position and you may want to consider adjusting your bid to achieve the best performing position. However, if you do decide to increase or decrease your bids, you should still check back in a week or two to make sure that your keyword is performing similarly since changing its average position.

If you wish to automate the process of testing and adjusting bids, you can use the AdWords Keyword Positions report in conjunction with the Position Preference feature within AdWords to actually optimize your ad's position. With the Position Preference feature, you can select a specific position as a target. If you have determined that you achieve highest ROI with positions 3 through 4, for example, you can set your position preference to these positions. The system will then try to show your ad in positions 3 through 4 by increasing or lowering its bid. You should keep in mind though your changes may improve the ROI of your campaign because your ads are converting well at a lower cost, it could decrease the total amount of traffic to your site if you've specified that you'd like your ad to be in a lower position on the page. Be sure to check out tips in our Help Center on choosing settings and pricing for Position Preference.

If you use Analytics, you can check out more ROI tips from the Google Analytics Conversion University.

Traffic Estimator Tool

If you don't use Google Analytics, you can still adjust and optimize your bids using the Traffic Estimator Tool. For each keyword you select, you will be able to see the minimum bid, maximum CPC, the search volume bar, Estimated Ad Positions, and other information. The most relevant column for the purposes of testing ad ranking against ROI is the Estimated Ad Positions information. The Estimated Ad Positions column shows your ad's estimated position on each of your keywords with your current maximum CPC. If you're unhappy with the estimated ad position, enter a new maximum CPC in the Maximum CPC field and click 'Get New Estimates.' You can follow a step-by-step guide on how to use Traffic Estimator here.

Testing again and again

Lastly, you can always measure results without any special tools by simply looking at your conversions and your position, and then manually adjusting your bids until you achieve your optimal ROI. We want to emphasize that bidding higher CPCs for the keywords that you want isn't always what's best for your ROI. Instead, we recommend that you find out where the keyword is converting the best for the optimal cost. In this experimentation process, 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 sweet spot where you are most effectively reaching your advertising goals.

For a more comprehensive range of topics related to managing bids, we recommend that you visit the Managing Cost-Per-Click and 'How do I strategically maximize my ROI?' topics in the Help Center. And you may also want to read more about the Conversion Optimizer beta.

As always, we want to know about the optimization tips you're interested in. Please email us to let us know and you may see your question answered in a future post.

Posted by Feng, Inside AdWords crew

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Google participates in Stanford AdFraud 2007 workshop

Over the past several years, Google has encouraged academic research and participation in the area of click fraud detection. Our Ad Traffic Quality team is excited to continue this support and recently participated in the AdFraud 2007 workshop at Stanford University. The workshop was attended by more than one hundred participants from academia and industry, and provided an open forum for discussing the technical and social aspects of fighting click fraud.

Dr. Kourosh Gharachorloo, who leads Google's Ad Traffic Quality engineering team, presented the opening talk at the workshop. Kourosh's talk focused primarily on the economics of online advertising and click fraud. The talk presented two frameworks modeling advertiser spend against Google's incentives to help advertisers achieve better ROI. The first framework illustrates how Google's incentives are aligned with those of our advertisers - i.e. our click fraud detection techniques improve advertiser ROI, which then leads to increased advertiser success with AdWords. The second framework shows how low-quality sources of traffic in the Google Network directly reduce Google's revenue along with the revenue of our content partners. The combined frameworks demonstrate that Google has strong economic incentives to fight click fraud, in addition to the extremely important goal of earning and maintaining advertiser trust.

Kourosh's talk also included an overview of Google's approach to detecting invalid clicks. In addition, he described the limitations of the metrics used by the click fraud detection industry to evaluate the impact of click fraud. He concluded the talk by discussing the additional data that Google discloses to advertisers, which uniquely enables AdWords users to reconcile their web server logs with the statistics in their AdWords accounts.

The Ad Traffic Quality team will continue to collaborate with the academic community on research projects and events such as the Stanford AdFraud workshop. For the latest on what this team is up to, please visit the Ad Traffic Quality Resource Center where you'll find Kourosh's presentation [PDF] and a 70-minute video of his talk.

Posted by Judy, Inside AdWords crew

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Please Upgrade to AdWords Editor 4.0 by October 3rd

We'd like to ask anyone still using AdWords Editor 3.5 to upgrade to the latest version (4.0) before October 3, 2007. After October 3rd, 2007, version 3.5 will no longer be supported. As you may already know, old versions of AdWords Editor are retired 60 days after new versions are released in order to optimize our resources and provide the best user experience for AdWords Editor users.

To upgrade, just follow the automatic download prompt that appears when you start AdWords Editor. Important note: To preserve any comments or unposted changes, you will need to export an archive of your account before upgrading. After you've completed the upgrade, simply download your account and import the archive file.

For a complete list of version 4.0 features, please see our release notes. And, if you're not sure which version of AdWords Editor you are using, here's how to find out: Within the program, go to the 'Help' menu then click 'About AdWords Editor.'

Posted by Trevor, Inside AdWords crew

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New CPA bidding product available

We've heard your requests for a cost-per-acquisition (CPA) bidding tool so we're excited to introduce a new AdWords feature: the Conversion Optimizer beta. Conversion Optimizer helps you meet your ROI objectives by automatically managing your bids according to a maximum CPA goal. By automating the bidding process, this feature helps you minimize your conversion costs while saving you time.

Here's how Conversion Optimizer works: simply specify a maximum CPA bid and the Conversion Optimizer does the rest. It uses historical information about your campaign and automatically generates optimal CPC bids for each auction. You still pay per click, but you no longer have to manually adjust your bids to reach your CPA goals. Since the Conversion Optimizer can choose a new bid for each auction, you're provided with the additional benefit of spending money only on the search queries and sites where your ads are likely to convert. You can read more about how the Conversion Optimizer can manage your costs here.

In order to accurately predict your conversion rate and optimize your bids, the Conversion Optimizer requires that your campaign currently uses AdWords Conversion Tracking and has at least 300 conversions in the last 30 days. The Conversion Optimizer tries to keep the cost of each conversion below your CPA bid. However, if the actual conversion rate is lower than we predict, your CPA may exceed your CPA bid.

There are now two ways to bid using CPA: The Conversion Optimizer and Pay-Per-Action (PPA) beta. PPA lets you pay only when an action you define occurs (e.g. a newsletter sign-up or a purchase on your site). PPA ads are only shown in specific places on the content network -- a majority of PPA ads appear on publisher sites that use Google referrals, and a small portion of these ads also show up in AdSense for content ad units as part of a beta test. If you use the Conversion Optimizer, your ads can appear on both the search and content network. To learn more about when to use Conversion Optimizer and when to use PPA, please see this page in the AdWords Help Center.

To get started with the Conversion Optimizer, check out our how-to instructions in the AdWords Help Center.

Posted by Heather, Inside AdWords crew

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ROI: why it matters and how to track it -- part 2 of 3

Last week we introduced Fred Vallaeys, Product Evangelist for AdWords, and turned him loose on a topic that is likely to be of particular interest to just about every advertiser: Return on Investment (ROI). Today, Fred is back with part two of this three part series:

In part one of the series, I explained that it's important to measure ROI because this metric gives you the complete picture about the profitability of the keywords in your AdWords account. This week, I'll cover how to start collecting ROI data in your own AdWords account. Since ROI depends on how often you convert clicks into customers and how much profit you make on every transaction, you'll need to enable conversion tracking with conversion values in your account. Let's take a look at how to do this.

Conversion tracking is a free tool available in every AdWords Standard Edition account, and can be found by clicking on the 'Tools' link under the 'Account Management' tab. Once there, to start tracking ROI, click 'Start Tracking Conversions' on the Conversion Tracking page. In the two screens that follow, select the type of conversion you wish to track and the colors for the text block on your conversion page. The third page in the setup process is where you set the monetary value of the conversion by clicking the link 'Advanced option: conversion value' and entering your profit for the conversion.

You may remember from last week that we defined ROI as your profit divided by the cost of AdWords. AdWords will automatically track the amount spent on ads but you, as the business owner, must define the profit every time a conversion takes place. If every transaction has the same profit (e.g. when you sell a subscription for a fixed price), you can always set the same numeric value that represents your profit for the conversion. When you're selling items with different profits, you can set a different value for every transaction. Calculate the value to set by subtracting the cost of the item from the price for which you sold it. Note that your numeric value should not include a currency symbol and needs to use the decimal separator appropriate for your interface language. More details on entering your conversion values may be found here.

Your webmaster, or the person in charge of your website, can also use dynamically generated values to set the right profit value every time a conversion happens. We've documented the details of this process in the conversion tracking setup guide (.pdf).

Once conversion tracking is active, you'll see a few new columns in your account labeled 'Conv. Rate,' 'Cost/Conv.' (where Conv. is the abbreviation for Conversions) and 'Conversions'. Notice that ROI is not one of the new columns. To see your ROI based on your conversion tracking information you'll need to run a Keyword Performance report from the 'Reports' tab. Be sure to include the 'Value/cost' column (which is your ROI expressed as a percent) from the 'Add/Remove columns' menu. You'll probably want to save this report as a template and schedule it to run periodically. Note that you also have the opportunity to give your report/template a descriptive name, such as 'ROI Report by Keyword.'

For your reference, here is an example of such a report, with the Value/cost column highlighted:

(Click screenshot for a full-size image)

With your report in hand, you can see the ROI for every campaign, ad group and keyword. Any time the Value/cost is greater than 100%, you're making money, and the higher the value, the more profit you're making. This is powerful data that can help you optimize your account -- and next week I'll give some specific examples of how to use this data to give yourself an edge over your competitors.

Posted by Blake, Inside AdWords crew

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Create your own newspaper ads

Back in July, we made Google Print Ads available to AdWords advertisers in the U.S. Today, we're happy to introduce a free tool that will make newspaper advertising even easier: an ad creation tool that lets anyone design a customized and professional-looking newspaper ad in minutes.

Simply plug the text of your ad, image, and contact details into pre-designed ad templates, and the tool will automatically generate multiple designs you can choose from. If you need to change your messaging or resize your image, you can edit individual ads directly in the interface. And any ad you create using this tool can be reused as many times as you need in future print campaigns.

This tool currently supports six ad sizes, ranging from 1 col. x 1 in. to 2 col. x 7 in. Below are some examples of different types and sizes of ads that might appear in your Print Ads account:

(Please click on the image to see the full size.)

If you are interested in Print Ads, you can read more details on this new ads creation tool here.

Posted by Feng, Inside AdWords crew

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New Website Optimizer Strategy and Tips

Recently, we announced new features for Website Optimizer, including the ability to easily create and launch A/B split experiments. Today, we'd like to share with you a new testing strategy for Website Optimizer as well as two opportunities to hear Tom Leung, Product Manager on Website Optimizer, speak about these latest updates.

The Website Optimizer team has put together a new testing strategy called Time on page as a conversion goal. This strategy outlines how to set your conversion goal as a specific amount of time a visitor spends on your site. For example, if you want to test whether visitors to your site are watching a 30 second video in its entirety, Website Optimizer can accomplish this by recording each time a visitor spends 30 seconds on that page as a conversion. Full instructions on implementing this strategy and others are available on the Testing Guides and Strategies page.

If you'd like to hear more about these latest features, two of our Website Optimizer Partners recently sat down with Tom Leung, Product Manager for Website Optimizer, to chat about the new additions. You can sign up for a one-time replay of an hour-long webinar with Tom, which is scheduled for this Thursday, September 20th at 2pm EST. Alternatively, you can also listen to a 15 minute interview with Tom, available here.

We hope you'll find this material helpful. If you are looking for other creative ways to improve conversions with Website Optimizer, check out the Website Optimizer Help Center.

Posted by Trevor, Inside AdWords crew

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Websites that may merit a low landing page quality score

Our landing page quality guidelines have always stressed the importance of directing users to easily navigable landing pages that are transparent about the advertiser's business and that contain relevant and original content. In our ongoing effort to provide advertisers greater transparency about our approach to landing page quality, we recently created a new FAQ in the AdWords Help Center outlining the types of business models that users have consistently commented on as providing a poor experience. You can find the new FAQ here -- and below, we've highlighted the most important points:

Types of websites that will be penalized with low landing page quality scores:

• Data collection sites that offer free gifts, subscription services etc., in order to collect private information
• Arbitrage sites that are designed for the sole purpose of showing ads
• Malware sites that knowingly or unknowingly install software on a visitor's computer
  

If we receive user complaints about ads for the types of websites listed above, the advertisers of those websites may not be allowed to continue running AdWords ads for those websites.

The following types of websites are likely to merit low landing page quality scores and may be difficult to advertise affordably. In addition, it's important for advertisers of these types of websites to adhere to our landing page quality guidelines regarding unique content.

• eBook sites that show frequent ads
  
• 'Get rich quick' sites
• Comparison shopping sites
• Travel aggregators
• Affiliates that don't comply with our affiliate guidelines
  

Please note that all of the above information, along with further details regarding landing page quality may be found in the AdWords Help Center.

Lastly, you may recall past Inside AdWords blog notices alerting advertisers about upcoming landing page quality updates. Since our systems frequently visit landing pages and update Quality Scores on a regular basis, we will no longer post advance notice of upcoming updates. We will, however, continue to inform you of any significant changes to landing page quality guidelines or the factors which are considered in calculating landing page quality.

Update: Clarified text for 'eBook sites'

Posted by Judy, Inside AdWords crew

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AdWords Seminars: new locations and dates

Do you love the tips you read on Inside AdWords but want to learn more?

Here's your opportunity to attend an AdWords Seminar taught by a search marketing professional. We are excited to tell you about the locations of the Beginner & Intermediate level AdWords Seminars for the upcoming season: San Diego, Seattle, Dallas, Scottsdale, Los Angeles, and St. Louis. If you'd like to attend one of these sessions, you can find out more details including dates, course outlines, seminar leader bios, and registration instructions on the AdWords Seminars site. Register at least seven days in advance, and we'll even throw in a $50 AdWords credit.

If you don't see your city listed, and would like to be informed by email the next time an AdWords Seminar visits a city near you, you can let us know by filling out this form.

Posted by Feng, Inside AdWords crew

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New edition of the AdWords Retail Newsletter

To help you prepare for the fall season, the Retail team has put together the latest edition of the AdWords Retail Newsletter.

In this issue, you’ll find tips on how to optimize your AdWords campaigns for fall and Halloween. These tips, along with information about how to expand your reach using the Google content network, Audio Ads, and Print Ads, will help you start gearing up for the busy winter holiday season ahead.

To find previous issues of the AdWords Retail Newsletter, you can visit the Retail News section of our newly redesigned Retail Knowledge Center.

Posted by Feng, Inside AdWords crew

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ROI: why it matters and how to track it -- part 1 of 3

Over the past couple of years you've met a number of AdWords experts on our blog -- and, in that spirit, we'd like to introduce Fred Vallaeys, the Product Evangelist for AdWords. You may have met Fred in person, or heard him speak at recent industry events. If you're someone who attends these types of events keep your eye out for him: he loves to hear feedback from our advertisers firsthand.

Today, we begin a new series on a subject that is key to advertiser success: Return on Investment (ROI). In this series, Fred will cover why ROI matters, how to track it using tools available from AdWords or other sources, and how to optimize AdWords advertising for ROI.

Now that the stage is set, let's get started. Here's Fred:

I've heard it said at conferences that online advertising is the most cost-effective way for businesses to attract new customers -- but how exactly is such a claim measured? Well, one of the beauties of AdWords is that results are easily measured. Not only do advertisers get reports about clicks and impressions within their account, they can also track conversions of visitors to their site. One possible downside of having all that data, however, is that advertisers may become distracted by tracking lots of metrics at the expense of losing focus on the ones that matter the most.

On the other hand, many advertisers don't spend much time at all monitoring their campaigns. They might check only one metric, such as impressions, clicks, CTR, or their overall spend -- and so long as they don't see anything obviously amiss, they don't make any changes to their ads, maximum CPCs, etc.

Regardless of how much or how little an advertiser measures results, it's possible to miss out on potential profit if close attention isn't paid to the one metric that almost certainly matters the most: ROI. And while impressions, clicks, CTR and costs are all important components that contribute to the ROI, these metrics only show part of the picture.

The ROI metric can be defined in two ways: the revenue generated for every dollar spent on ads, or the amount of profit generated from every dollar spent on ads. I'm going to focus on profit here, since that's what most advertisers inquire about.

The formula for ROI is as follows (keeping in mind that the "revenue minus cost" in the top line equals profit):





For any campaign where the advertiser's goal is to get a conversion, whether it be a sign-up, a sale, or something else, the ROI should be greater than 100% -- which simply means that for every dollar spent on AdWords, they've made a profit. The greater the ROI number, the greater their profit.

Here's an example -- let's say an advertiser has two keywords ('flower delivery' and 'fresh flowers') and spends $50 on each. For the same $50, the advertiser receives 50 clicks for 'flower delivery' and 100 clicks for 'fresh flowers':

Keyword	Impressions	Clicks	Cost	Average CPC	Conversions	Profit	ROI
flower delivery	1,000	50	$50	$1.00	5	?	?
fresh flowers	1,000	100	$50	$0.50	10	?	?

Based on the data in the table, the keyword 'fresh flowers' seems like the better of the two because it has a lower average CPC and it leads to more conversions (sales). But without tracking the ROI on both keywords, an advertiser would have to guess whether it makes sense to change the bids for these keywords. If they were only looking at the average CPC or the conversions per keyword, they may be making assumptions that could end up costing them money.

Now, here's that table again -- but with figures added for ROI:

Keyword	Impressions	Clicks	Cost	Average CPC	Conversions	Profit	ROI
flower delivery	1,000	50	$50	$1.00	5	$100	200%
fresh flowers	1,000	100	$50	$0.50	10	$50	100%

Notice that the keyword 'flower delivery' has a much better ROI, even though it generated fewer conversions and fewer clicks for the same advertising cost. This could be the case for a variety of reasons -- for example, users who clicked on the 'flower delivery' ad may tend to buy products with a higher profit margin. The average profit per sale on the keyword 'flower delivery' is much higher ($20) than 'fresh flowers' ($5), which justifies the higher CPC for the keyword 'flower delivery', even in light of fact that it receives fewer conversions.

When an advertiser tracks and monitors their ROI, they are seeing the complete picture. This allows them to make smarter decisions about their online ads and, ultimately, make their business more profitable.

Now that you've seen why ROI matters and how it can help you to make more informed decisions, Fred will tell you how to track and monitor your ROI in part two of the series. Then, in part three, he'll take a close look at some tools and strategies for optimizing ROI. We hope you'll stay with us for the entire series -- and as always, please feel free to comment along the way.

Update: Republished to correct formatting of tables

Posted by Blake, Inside AdWords crew

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Just three more shopping months

As we launch into fall, many retailers are already gearing up for the most important sales season of the year -- the winter holidays. It may seem like we have a long way to go before December, but according to the 2007 Holiday eSpending Report, shoppers are hitting their favorite online stores well ahead of time -- some even report that they've already finished their holiday shopping!

With this in mind, it's never too early to start thinking of ways to attract more customers. We suggest creating a separate, fine-tuned winter holiday campaign with specific, narrowly focused ad groups and relevant keywords to attract potential customers. The Keyword Tool is a great resource to turn to for ideas and tips on creating a number of keyword variations.

You may also want to write ad text that appeals directly to the audience you're targeting. After creating multiple ads per ad group, you can look at the % Served column in your 'Ad Variations' table to see what kind of ad text attracts more clicks. And, remember that AdWords will automatically show the ad with the higher clickthrough rate (CTR) more often, so you can experiment with different ad texts to see what works best.

As always, you can visit the AdWords Help Center year-round to find ways to improve your ad performance. Retailers can also check out our optimization tips.

Posted by Christina, Inside AdWords crew

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New Features in Website Optimizer

Today, we've released our first major update to Website Optimizer, our free site content testing tool. Based on feedback received from advertisers and agencies, we've added three highly requested features:

1. We've added the ability to create A/B split experiments. This new feature is designed to make it faster and easier to optimize your website, and improve conversion rates. A/B experiments are ideal for testing different page layouts and pages with less traffic. Take a look at this multimedia demo to learn how to set up an A/B experiment.

2. You can now access Website Optimizer directly from the My Client Center. You can find more information here.

3. The experiment list is now automatically sorted so the most recent experiments appear at the top. We've also added the ability to delete experiments – by far our most requested feature.

We hope you enjoy these updates to Website Optimizer. If you would like to learn more about Website Optimizer, please visit the Website Optimizer homepage.

Posted by Trevor, Inside AdWords crew

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AdWords system maintenance on September 8

On Saturday, September 8th, the AdWords system will be unavailable from approximately 10 a.m. to 2 p.m. PDT due to our regularly scheduled maintenance. While you won't be able to log into your accounts during this time, your campaigns will continue to run as usual.

AdWords system maintenance typically occurs on the second Saturday of each month during the above times. We'll continue to update you here as we always have, but you may want to take note of our intended dates and times to help you plan for any scheduled downtimes further down the road.

Posted by Judy, Inside AdWords crew

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