I am working on a clients campaign and decided to peek at the Bid Simulator tool.

I looked at this and looked and looked drinking my coffee (nectar of the gods).... and it dawned on me Google is trying to toss us under the bus!!!

Max. CPC.......Estimated Clicks......Estimated Cost......Estimated Impression.

$0.48................1,690........................ $483.00............26,900

$0.44................1,580........................ $421.00............26,400

$0.38................1,370........................ $310.00............25,700

$0.34................1,220........................ $245.00............25,000

$0.31................1,100.......................$ 198.00.............24,500

$0.27..................987........................ $160.00.............23,500 (current)


Does anyone else besides me see what the problem is here??

**It takes paying attention to the numbers** but it's most certainly a way for Google to rip off unsuspecting webmasters.....

Do no evil, my ass....

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Talk to me SA, what are you seeing there? Forgive me, but I DO get a slight confused when it comes to adwords charts...I mean, I know what it all means but what are your calculations telling you?

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I'll need clarification, too. Where's the bus?

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M.-J. Taylor
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Well from what I see

I pay $160.00 for 1,000 clicks.

Which is not bad....

But to buy another 700 clicks it will cost me $320.00

Another 1,000 clicks therefore will cost me $480.00

Why would I pay 3 times more for the second set of 1000 clicks?

Why should I????

Because I cannot find a good reason.

Even if we look at the impression gain from current bid to upper bid the gain is minimal but the cost rises drastically.....

I thought the more you bought the less you paid in life???

This has really set badly with me......I am disgusted more than ever with Google, and I've been one of their harshest critics.....but this .......this is....shameful???

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If you think that's weird...

$483.00 / $0.48 = 1006.25 clicks

1006.26 != 1690 (estimated clicks)

Perhaps they're leaving some play for bids under $0.48 which result in clicks ... but ... in practice you'll most often find yourself in a bidding war for #1 (your competitor pays $0.01 less than you and that means you're paying full price).

1690 (estimated clicks) * $0.48 (price for #1) = $811.20 (how's that for an estimated cost?)

. . .

And on the other side of the coin:

$0.27 (low-ball bid) * 987 (estimated clicks) = $266.49

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I'm sorry, but this makes perfect sense to me. If you want more clicks you have to bid higher so that your ad appears higher in the list; that's simple and fair to all advertisers. And, yes, that will cost more. This is a system based directly on what the market will bear. Blame the principle of capitalism; blame the competition, but Google is playing by the rules of a free market. Would you like to government to regulate it?

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Ya I guess I could say at this time that I don't believe Google is intentionally trying to rip advertisers off as this wouldn't fly for a very long time AND the world would catch wind of it...

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My bolding.

Mr Market will take care of that himself: Credit cards: Are they killing online advertising?

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I will use a search engine before I ask dumb questions.

mjtaylor hit the nail right on the head. This is exactly what you are seeing in the chart. On the lower end, you get only about a few thousand less impressions than you do on the higher end. But you get way many less clicks. This is because your ad is shown lower down the list (because your bid is so low.) The guy who is bidding the most, he is the one getting those clicks at the top of the list. Only about 3k or more impressions to do so but he is getting about double the clicks because he is showing in the top position. And as we know, the higher on the page one of Google, the better chance the traffic is going to click to you.

So this shows us a method for budgeting a campaign. If we have all the money in the world and our conversions can justify it then maybe we want to bid top dollar and get all the clicks. If we are on a tight budget and need to milk every penny out of the campaign we can possibly get, always bid as low as you possibly can or need to simply to get the traffic that will sustain your campaign profitably because either way we will still get some traffic.

Of course, on the back end of that is a whole lotta other work we need to do to really make it profitable because just as you can lead a horse to water you can't always make them drink.

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Well I think mjtaylor has it right. Google is simply cashing in on a free market and capitalism. I think you are also missing a point as well.

It is more important about ROI and Profit rather than how much you are spending. As long as this meets your goals, who cares what you spend... when I finally realized this, it was much easier to spend alot more money with Google.

As long as you track everything and can justify it...

I would venture to say that no matter what keyword(s) you are targeting there is always going to be a finite number of possible clicks you will get (no matter how big your budget is). The first clicks are the easiest to attain but as the number of potential clicks narrows the competition may be more fierce.
Just a thought.
But overall, I don't see a glaring problem with the chart as it stands.

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Or you could look at it like this:

Max Estimated Estimated Additional Additional Sales at At a $50 Avg Sale At a 50% Margin ROI
CPC Clicks Cost Clicks 5% Conversion Rate Additional Earnings Additonal Profit

$0.48...1,690.....$483.00.....703............35... ................$1750......................$713.50 .....................5.42
$0.44...1,580.....$421.00.....593............30... ................$1500......................$539.50 .....................5.75
$0.38...1,370.....$310.00.....383............19... ................$9500......................$320.00 .....................6.33
$0.34...1,220.....$245.00.....233............12... ................$6000......................$177.50 .....................7.06
$0.31...1,100.....$198.00.....113............6.... .................$3000......................$51.00 ......................7.89
$0.27....987.......$160.00......0..............0.. ...................$00..........................$0 .00.........................0

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Let me try this another way

23,500 Impressions Cost $160.00

Additional

3,400 impressions will cost $326.99

Basically 85% less for twice the price......does not compute.....

Is this pricing somehow tied into positions do you believe? That does not seem possible however since the impression numbers are not that much of a variance.

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This makes perfect sense. Newspapers and magazines do the same type of pricing. The better the position on the page, the higher the cost. When you think about it, you probably won't get a lot more impressions than the person taking the 2nd best spot.
With Google it also has to do with how you are spending your money during the day too. If you are spreading out evenly over the day you may at 1 point get the #1 spot for say 0.20 while at another time you will get it for 0.48 with the same max.
I never bid to guarantee the #1 spot all the time because it is a waste of money. I actually get more clicks from the first spot on the right column than from the #1 spot in the left. So I bid for the 3rd spot. But you have to play around and see what works best. That is why you should have 2 or 3 or more campaigns going for the same website.

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Rule 1: Ignore Google Adwords Recommendations
Rule 2: Do not march on Moscow
Rule 3: Do not start a land war in China
Rule 4: Ignore Google Adwords Recommendations

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David you are too late. Hitler should have had such an advisor

Especially with the big firewall of China

What are the Chinese government afraid of? I thought openness, trading and commerce have a long history in that cultural nation. And you know, now the Chinese have what we here call a forced marriage with Uncle Sam in addition to Larry from USA and Sergy from Russia.

I miss Rule 5: Don't forget rule no 1 and rule no 4.

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I will use a search engine before I ask dumb questions.

Capitalism be damned, Google believes in 'PRAGMITISM'. While the Powers That Be may sympathize with a more liberal agenda their business model is to build that which makes them money. Don't credit them with a philosophy of Capitalism which suggests Free Market, which with their pre-eminent (dominating) position in search says they obviously don't believe in giving the little guy (or stupid competitors) a chance. Many of us use Adwords because the tools and the clicks work. You just have to do your own performance testing to make sure that some of the tools do not lead you astray. You have to read all the tutorials and think hard about the suggestions. Their easiest tools are like any successful salesman, if their lips are moving they are lying. Buyer beware is still the rule. Just because Google is good does not mean that they are 'Good'.

What does in alphabetical order

1. Canada, Prime Minister of Canada / Premier ministre du Canada
2. India, Prime Minister of India
3. Norway The Office of the Prime Minister - regjeringen.no

have in common? All three countries have an economist as a prime minister and no bank in any of those three countries have as far as I know had problems so long during this financial crisis. Canadian banks are assumed to be the most secure in the world and here we use the mixed Scandinavian economic model.

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I will use a search engine before I ask dumb questions.

Pragmatism? Oh, dear, are we going to start discussing economic theory? ;D
I will agree that Google might well be following a Pragmatic Capitalism model.

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Who mentioned the word capitalism first?

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I will use a search engine before I ask dumb questions.

There are 2 factors at play here :

• The current bidders' current max. bids; and,
• The inverse relationship between CTR and percentage of bid actually paid.

Not only is it the case that one's actual CPC will never be more than $0.01 greater than the next highest bidder, given a sufficiently high CTR it may actually be less than 1 or more lower bids.

Therefore, one cannot here simply multiply a prospective max. bid amount by the expected no. of clicks to get the expected total cost.

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It's called the Law of Diminishing Returns.

Each additional marginal unit of output costs more than does the preceding one.

Quite well known to and understood by economists.

Diminishing returns - Wikipedia, the free encyclopedia

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SA, I have to ring in here with MJ and some others. Although I don't use AW or AS, I have, and initially, my response was the same as your own. But upon reflection, it made perfect sense to me.

And as Deepsand says, the final cost is not linear.

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The anomalies in that table of figures leaped out of the page as soon as I saw it. I reckon that there's no direct mathematical correlation between the CPC and the clicks in Google's algorithm. There's probably an intermediate factor, ad position, which is determined by the CPC, and this, in turn but independently, determines the number of clicks.

There are psychological reasons why the top ad position is not always the most profitable. The aim of a campaign should be to achieve the optimum rather than the maximum. The difference in ROI can be startling. There's a link to a strategy web site with detailed info about this on the Support page of the Abacus AdWords Campaign Manager. (You don't need to use the software to access the Support page.)

that's the "fill yer boots while you can" model!

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Wars in general, and bidding wars in particular are expensive.

As SuperMan points out, its ROI that counts, and being #1 almost never shows a good ROI. The excessive extra marginal cost to move up from positions 4-6 eats up all the extra contribution (and some).

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Clarrie
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Clarrie's got it!

Why you guys can't over of Google? Google takes 80% of commison between the publisher and advertisers, because from 5 cent minimum for advertiser the publisher gets 1 cent. Clicks on Google ads has been in my sites something 0.01%, but when I sent it to run proper banners the CTR went to 2-3% still much less than my mobile sites are doing with 5-6%.
I got recently a statistics to consult from a advertiser side in Google, where they where showing similar results. Over a 60% of keywords targeted by recommendation of keyword suggestion tool never showed up. Only few keywords went nearly 1% of CTR, mostly they where around 0.01-0.10.

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I couldn't really understand everything that Veikoh said, but the second paragraph is interesting. It seems to be making a case for the "shotgun" approach to keyword selection rather than singling out specific keyword phrases... I think.

Your figures don't seem to stack up to me. There's an obvious error in that 6 x $50 = $300 not $3000 (same for 12 and 19), but also, how have you calculated the additional profit?
Additional gross profit: $1750 x 50% = $825
Additional cost of ads: $483 - $160 = $323
Additional profit: $825 - $323 = $502
ROI = 55.42%
Am I missing something?

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I read it as more of an indictment of the validity of Google's recommendations.

Which, if that's what it is, is an indictment I would have to agree with.

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The answer to that question is, if you paid for the second set of clicks, would your campaign still be ROI positive -- and how much so?

The key to learning that is watching conversions at your site -- when a visitor "converts" to a prospect, lead, or customer.

Let's say you have a site with a lead form for a B2B service, and each time you get 10 leads, your sales staff closes 1 for a $800 sale. Say also that you get 5% leads from your adwords visitors. Here's the formula:

Leads per 1,000 = 50 * 2(you buy the 2nd 1,000) = 100 leads. The sales staff closes 10 worth $8000 in sales to the company -- for just the first sale (customers may buy other services throughout the year). Your adwords cost is $483 + your time... say $800. You are now in Positive ROI at $7200 for just the initial sales resulting from your work.

- Scott
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I think Doc is right; it probably is an indictment of the validity of Google's recommendations. Google recommends using a small, carefully researched set of keywords. Perhaps this should indeed be ignored, and a large set be used to cover many similar search terms.

Touché.


Thank you for finding the term on the tip of my tonque.
So nice to see a truly substantive post by a newer member. Please do stick around and share with us.


Wow, there's another new member with something to say! Well done, please stick around!

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I haven't yet had time to look exact bid amounts but there was a list of few hundred key phrases to bid which was made by some professional "Google Experts" company in UK charging 800 pounds per day for their consultancy. This was done by using Google's keyword suggestion tools where search volume was predicted few hundred per day. Previously I remembered those guys from that company claiming that Google search algorithms are something "top secret formula" them to find out and they never bothered to perform simple Google search to find the original document from Standford edu website
By now this client had used them nearly a year and gave me to evalute their work having spent over 6000 pounds to Google. Over 60% of bids had "ads shown" amount 0, the CTR's where as low as <0.1%
If I would have run their campaign, I would have used only targeted sites or keywords (phrases) where I could get at >1% CTR and put something as goal, like contact form or subscribe news.
But as far I know from my sites, people are not anymore clicking to Google ads. I have had only 3 clicks in www DOT topwebcat DOT .com since I launched it earning me total 12 cents. And I have stabile 50-70 visitors per day in that site. Any other banner or bidded position would have made me much more money than Adsense.

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It's reports like the last one from Veikoh that make me ashamed to be British! Not only is £800 per day like robbery, but making such misleading claims is unprofessional, even scandalous! We Brits are not all so dastardly, I assure you.

My advice to you, Veikoh, if you'll permit me, is, if you cannot find someone whom you can trust, get some good software to do it for you.

I agree that Adword recommendations are usually not anywhere near close to accurate. My assumption (no data to back this up) is that the max bid price for each position is based on an average quality score for other users bidding on the same keyword(s).

I've found it is usually a good idea to start off campaigns trying to attain #3-6 ad position. Once you have some stats to work with you can decide if you need to bid more/less or cancel the campaign. If you're working within a budget then spend what you can afford. Measure, track, adjust, and repeat.

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That makes perfect (ad)sense. And dead easy for Google to calculate also.

That's the way I do it, too, although I aim for positions 4-6.

That which you describe as "anomalies" are neither anomalies nor results derived solely from some arcane algorithm, but rather those experienced in an opaque generalized second price auction, results manifesting the economic Law of Diminishing Returns.

What here makes them seemly strange owes to the failure of said table to clearly and explicitly distinguish between the Max. Bid and the Expected Cost-per-Click. Additionally, being an opaque auction, it is easy to lose sight of the fact that said data are based on the undisclosed number, bids and click-through-rates of other current participants.

The true goal should be, not to maximize ROI, but to maximized Net Profit.

So long as the marginal income yielded by each additional unit exceeds its marginal cost, it is profitable.

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You're right, of course. I should have said "apparent anomalies", to be strictly correct.

Yes, but even if the 'Estimated Cost' is divided by the 'Estimated Clicks' to get the 'Expected CPC' the (apparent) anomalies are still proportionally similar.

Right again, provided that the budget is (as good as) unlimited. If it isn't, it's better to find the optimum ROI for the campaign, and use any surplus funds for a second campaign to promote a second web site for the same product with different content and keywords. This is what I do, and it works a treat.

As noted, a natural consequence of an opaque generalized second price auction.

Implicit is the understanding that the goal is to maximize the aggregate net gain from all endeavors engaged in.

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So very true. There is no magic fairy dust in ad type that will overcome a site that doesn't do the job. That's a tough one to explain to my web development students.

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Indeed. A promotion is only as good as its weakest link, just like a hi-fi system (keyword search terms -> ad groups -> ad text -> landing page === stylus -> record player -> amplifier -> speakers).

The drinking part is relatively easy; the true difficulty lies in getting them to float on their backs and blow bubbles.

Translation : Lip service is cheaply had; effecting meaningful behavioral change costs dearly.

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