The Adwords Beginners Hump

Unlike other PPCs (Pay Per Click) like Yahoo Search Marketing, bidding in Google,s Adword is not straight forward. Nearly all the other PPC companies list their adverts purely based on auction basis. That is, if you bid higher you appear higher in the sponsored link section of the SERP (Search Engine Rank Pages)

Adwords on the other hand takes into account the relevancy of the advertisement for the keyword you bid on. This translates to mean that the fact that you listed top on the sponsored links does not mean you are paying the most per click. This is an ingenious way to reward highly performing relevant adverts. And it works for both Google and the advertiser. Since the advert is highly targeted and therefore clicked more, Google shows it more consequently its even clicked more.

And to encourage the advertiser to keep spending, Google discounts the price for the ad to reduce how much the advertiser is spending per click. Yet since the ad is clicked often Adwords still makes a steal even after discounting the cost per click.

This system of appropriately discounting cost per click based on an adverts performance is designed around Quality Score (QS); which in turn determines a keywords minimum bid.

So what is minimum bid? Minimum bid is the least amount you should bid for your advert to show in Google Search. This minimum bid is a factor of the QS. You increase your chances of showing higher by bidding higher prices. This bid is considered your maximum cost per click. Adwords will never charge you more than you maximum cost per click. The importance of minimum bid follows below.

In Adwors you only pay one cent ($0.01) above your competition regardless of what your bid is. This is to mean (without taking QS into considerstion/0 if one advertiser bids $2.50 for a keyword and another bids $3.00, the second advertiser will be placed above the first. However the second bidder/advertiser will not pay the $3.00 they bid, rather they will pay $2.51, just a cent above the competition.

When you put QS into the mix, an advertiser with a high QS can be paying $0.75 and still be placed above the advertiser who bid $3.00 but paying $2.51. The reason the third can pay $0.75 and be listed top is because his QS is high and he therefore requires a lower minimum bid to show in the SERP.

According to Brad Gedde of eWhispers, there are three kinds of QS; Account QS, Adgroup QS and Keyword QS. All these work with increasing importance in determining how much you pay per click. Keyword QS is particularly important. It is determined by the adverts CTR (Click Through Rate) history both overall and recent, relevance of the ad copy, the account general QS as well as the landing page.

Now here comes the Adwords beginners hump; when you set up a new Adword account you obviously have no history of any kind. You account QS is unknown. Therefore the Adword algorithm has no way of telling how best to rank your adverts. So what does the system do? It jacks up your prices sky high. It is common to have the keywords suggestion tool predict a fair amount of traffic at $0.30., only to bid on the keyword in a new account and have the system requesting a minimum bid of $5.00 just to show the ads.

The system does this to put the onus on the advertiser to prove the worth of their ads. The only way to break this is to bid very high with a new account, establish some good QS and the system re-adjusts itself and drop your prices per click.