A battle rages on between efficiency and volume in paid search engine programs. Google, in all of their infinite wisdom, has addressed this keyword auction paradox by releasing the Bid Simulator.
Of course, this isn’t strictly a new concept. Google is the second search engine to attempt to provide this data to various advertisers.
Yahoo was the first search engine on the block to try this. Their effort was codenamed Panama and was a modest, although not resounding, success. However it failed on one major front. It lacked insight into the incremental CPC and the information was only available in the interface and couldn’t be exported via an API.
Google solved this problem, but the bid simulator doesn’t have the ability to export this data. A minor drag, to be sure. However, Google says the functionality is on the way and should act as a tipping point in the war between advertisers and data.
What makes this tool so great is the nature of search engines. Search Engines will always be able to collect and collate more relevant data than human eyes. That’s just the nature of the beast. For example, Google knows the exact keyword phrase that your keyword appears on, the competitors and their bids.
This information does a number of things. Most importantly it lets advertisers know how much juice they can still squeeze out of any given term. This includes keywords that may be overbid, or are at the 1.1 position, and can still receive additional traffic.
For now, it’s extremely important SEMs become intimately familiar with the concept of incremental CPCs. Bids are increased with one end goal in mind, increasing the clicks.
However, people tend to forget the impact the clicks that they keyword was already garnering. This seems obvious but it’s important not to forget. The increase in CPC means you’re paying more for those clicks you were getting before the bid change. Now let’s look at the bid simulator for an example.
Look at the example above. a $0.43 change in maximum CPC yields an incremental 52 clicks, and only changes the actual CPC by $0.32. The cost for each of those “incremental clicks” is $1.59 (change in cost/change in clicks = incremental CPC), and not the $0.32 change in actual CPC.
This is an important point to take to heart. There is a premium for those clicks that would have been garnered without the bid change in order to receive those extra clicks. This also translates to the measurement of incremental cost per sale, or any other conversion metric the advertise ascribes to.
Of course, this type of analysis is paramount when establishing your advertising budget. It’s also important when measuring incremental volume. This data is occasionally hard to establish, and not available for all keywords. Still, it’s potentially the bearer of extremely useful information. Make a habit of taking it into consideration.