The following is an excerpt from “Bid Testing Best Practices”, a white paper from OptiMine. In it author Jason Mulvey explores the three primary methods for conducting bid testing in paid search. In this post, Jason highlights position-based bid testing. Visit optimine.com to download the whitepaper.
Position-Based Bid Testing
Historically, position-based bid testing has been one of the most popular methods because of the questions it answers: What do I have to pay for position X, and does the conversion rate or value per click change at different positions? Another reason for its popularity is the ease of execution: increase bids until the desired position is reached, and observe the changes in conversion and value data.
Although popular, position-based bid testing can be very expensive, especially if the positions you are testing for are well above the value per click of the keyword being tested. In such cases, you are likely to drive up the number of clicks without a corresponding increase in conversions, leaving you with significantly higher costs and little, if any, incremental revenue.
A new “modern” variation on position-based bid testing is the use of the Google first-page bid estimate. In this case, Google will estimate the bid necessary for an ad to appear on page 1 of a search matching the specific keyword. The danger, again, is in bidding a keyword up beyond its value and incurring costs far beyond its revenue potential. As tempting as the Google bid estimate is, with the potential to drive more conversions and revenue, conversions and revenue don’t drive profit. If a keyword is worth $0.50 per click on average, bidding it up to page 1 for $5 per click may result in real revenue increases, but the financial losses incurred will be just as real. Simply put, the chances of finding a golden keyword with 10 times the average conversion rate are as good as the chances of winning
In the next post, Jason will look at the current bid-based method of bid testing. In the meantime, you can have the white paper in its entirety by downloading it today.