The Definitive Framework for Bidding

in AdWordsWijnand MeijerSr. PPC Strategist | iProspect | @wi jnandmei jer

Agenda• About me

• Disclaimer: “Great bids can’t fix a lousy campaign”

• Prerequisites for bidding:• Sophisticated Goal Setting• Proper Tracking• Multi-touch Attribution

• Growing complexity & limited time

• Bidding principles

• The AdWords bidding framework

• Appendix: free rules, scripts & 3rd party tools

About Me• Sr. PPC Strategist at iProspect Amsterdam

• Started with PPC in 2006 for SMB accounts

• Joined iProspect in 2009 to work on larger accounts as Sr. Consultant

• Taking my time to write the Complete AdWords Audit Series (15 down, 4 to go, started 3 years ago)

• Specialized in PPC audits for the last 4 years

• Voted in top 25 most influential PPC Experts in 2015 & 2016

Disclaimer“Great Bids Can’t Fix a Lousy Campaign” - Craig Danuloff, 2010From his great eBook 21 Secret Truths of High Resolution PPC:

Don’t worry too much about the bid for any keyword until it:

• Lives in a tightly organized ad group• Uses the right match type• Attracts appropriate search queries• Is paired with targeted and persuasive text ad copy• Sends traffic to an effective landing page or conversion path

Any bids calculated and set before these milestones are achieved are based on inconsistent inputs, so they really can’t be accurate or optimal.

Spend a lot of time on bidding… after you’ve spent a lot of time on everything else.

Prerequisites for bidding

Goal SettingAre you as sophisticated as you can be?

Digital 1.0: Fixed Budgets

Digital 2.0: Fixed CPA or ROAS

Digital 3.0: Max Profits

Google’s Profit Playbook Hangout

Goal Setting: Fixed Budget“Spend € 50.000 / month no matter what”

Required reading for anyone still on a fixed PPC budget:Overthrow The Tyranny Of Paid Search Budgets:

• If ROI is positive, why constrict spend if you would be making money by spending more?

• If ROI turns negative, why keep spending?

The decision to treat the ad spend as a cost of revenue instead of part of the media budget is simply an accounting choice.

Provided you can hit your efficiency metrics routinely over time, this construct allows paid search managers to focus on one and only one thing: how can we efficiently drive more revenue to my company through paid search?

Goal Setting: Fixed Budget

50 liters please, hope it gets me where I need to be this

month!

Goal Setting: Fixed Budget & EfficiencyWhat’s even worse than a fixed budget?

“Spend € 50.000 / month AND hit my target CPA of € 50”

Again, required reading of George Michie for people trying to solve this unsolvable situation: The Paid Search Uncertainty Principle.

I demand a car with 50 liters of petrol in the tank AND I need to

drive exactly 800 km at any speed and under any circumstances,

without stopping for petrol or having any left by the end of this month.

Budget

Target Conversions

Market opportunities &auction dynamics

Goal Setting: Fixed Budget & Efficiency

Goal Setting: Fixed Efficiency“Hit my non-branded CPA target of € 50 no matter what.”

The good: you can focus all your time and energy on reaching this efficiency and let budget rise and fall with market opportunities.

The bad: your current CPA or ROAS target may not be the one that maximizes your total profit in real $, €, £…

Pro Tip: use 50% of your margin as a starting point for your target CPA or ROAS calculation:CPA: (margin in $, €, £… × 50%) × lead to sale conversion rateROAS: 1 / (margin in % × 50%)

So you’re probably not asking yourself “Would I rather have 100 conversions for a CPA of € 50 or 120 conversions for a CPA of € 60?”

Goal Setting: Fixed EfficiencyI’m only interested if I can

drive 16 km with each liter of petrol

Goal Setting: Profit-drivenBid for the combination of volume (conversions or revenue) and efficiency (CPA or ROAS) that delivers you the most total profit.

Profit-Driven Marketing articles by Google

Goal Setting: Profit-drivenWhich car would give me the best value for

money?

Proper TrackingWhat gets measured gets doneHow do you measure conversions, revenue or profit?

More like this?

Or more like this?

Do you include (especially for mobile):

• Lifetime value?• Cross-device conversions?• Phone calls?• Store visits?• App downloads?• Referral value?

Conservative estimates are less wrong than “0”!

Multi-Channel Attribution Modeling: The Good, Bad and Ugly Models

Multi-touch AttributionGive credit where credit is due

The only use for last click attribution is to get you

fired. Avoid it.

Multi-touch Attribution

Aaron Levy - What’s the best attribution model For PPC?

Multi-touch AttributionWhat’s ‘the best’ model?• According to Google it’s data-driven attribution. Worth trying if you’re eligible: 20.000+

clicks and 800+ conversions in 30 days.

• According to Avinash Kaushik, it’s something like this (import available from GA solutions gallery):

• According to Aaron Levy it’s a reverse iteration of time decay (first preferred), not available in AdWords or Google Analytics:

Prerequisites for biddingTo Summarize

Don’t

Work with a fixed budget

Track the first online sale or lead only

Use last click or first click attribution

Better

Work with a fixed non-branded CPA or ROAS target and a flexible budget

Include cross-device conversions

Use position-based, linear or time decay attribution

Best

Be profit-driven, with a flexible CPA or ROAS that maximizes total profit

Include lifetime value and measure (or estimate) all relevant conversion channels

Use a data-driven or custom attribution model

Complexity & Limited Time

Growing ComplexityMore and more contextual signals to bid on

With Display campaigns you can add display keywords, placements, site behavior, topics, in-market audiences, (custom) affinity audiences and similar users to the mix.

Interface language

Demographics

(intent)

& weekday

Growing ComplexityMore and more contextual signals to bid on

“If you're advertising in the US using the AdWords interface, you could potentially apply the following bid modifiers: • 17,000 cities• Across six distinct blocks of time • For each of the seven days in a week• For users that have visited specific parts of your site before• While factoring in devices.

There are over one million bidding combinations available to you on just one keyword in that example. It becomes pretty difficult to scale that level of bidding precision when you’re managing accounts with thousands of keywords.”

Google Best Practices

Building Your Ultimate Marketing Stack

Growing ComplexityNot just contextual user signals….

Limited TimeWhat’s the best use of your time?

Chris Haleua – Advanced bidding

Bidding Principles

Bidding Principles1. For the sake of simplicity: accept that conversion rates do not vary (much) per position.

2. Therefore, do not bid for a specific position, but do acknowledge that 85% to 95% of the clicks come from top positions, as you can see for yourself:

Google ‘Other’ got 41% of the impressions, but just 4% of the clicks.

Search Partner ‘Other’ got 65% of the impressions, but just 14% if the clicks.

Clicks | Impr.

Bidding Principles3. Use value per click (VPC) + your efficiency target to guide you in setting bids.

In other words: what you’re willing to pay for a click is linked with what it’s worth to you. You can bid a bit higher than your VPC as your actual CPC will be lower than your max CPC.

• VPC for CPA targets: (conversion rate) × target CPA

• VPC for ROAS targets: (average revenue per click) / target ROAS

Bidding Principles4. To calculate bid adjustments for segments*) at the campaign level, compare the

significant performance of that segment (e.g. 10+ conversions) with the campaign average.

Calculation for CPA bid adjustments:100 × ((conversion rate of segment / avg. campaign conversion rate) -1)

Calculation for ROAS bid adjustments:100 × ((conv. value per click of segment / avg. campaign conv. value per click) -1)

These calculations use conversion rate and conv. value per click instead of CPA and ROAS. The former is more stable (less frequent adjustments needed) but the latter is more optimal (but also more sensitive to auction dynamics as Quality Score and competition, so it needs more frequent adjustments). Read 3 Advanced Tips For Bid Adjustments In Google Enhanced Campaigns for more background on this topic & corresponding script for mobile bid adjustments based on ROAS.

*) segments are: devices, locations, times and audiences

Bidding Principles5. Determine a ‘conversion-less’ threshold in terms of clicks (preferred) or cost that you

accept before pausing a keyword, ad group, placement, etc.

E.g.: 2 × the average number of clicks needed for a non-branded conversion.

If your non-branded conversion rate is 2%, this amounts to: 2 × (1 / 2%) = 2 × 50 = 100 clicks.

So in this example, you pause after 100 clicks and 0 conversions.

6. Also wait at least 1 full conversion cycle before making any decisions about new keywords, ads, placements, etc.

Bidding PrinciplesTo Summarize

• Conversion rates do not vary (much) per position• But 85% to 95% of paid search clicks come from top positions

Accept

• Value per click with efficiency target to calculate Max CPC• Segment performance with campaign average to calculate bid adjustments

Align

• How many non-converting clicks are acceptable to you• How long a full conversion cycle takes

Determine

Finally: the Framework

The AdWords Bidding FrameworkMatch your bid strategy with your monthly non-branded conversions

The AdWords Bidding FrameworkHuman & Machine work together to increase Ad Rank

Quality Score (>40%)•Expected CTR (39%)•Landing Page Experience (39%)

•Ad Relevance (22%)

Bid (50%)•Conversion rate and/or revenue per click for each (combination of):•Query•Device•Location•Time•Audience•Etc..

Hacking Google’s Quality Score Formula:blog post & webinar

Ad Extensions (<10%)

Spend a lot of time on

improving these (creative work for humans)

And let the machines crunch these numbers (iterative, data-intensive, real-time analysis to be automated)

The AdWords Bidding FrameworkIncrease in Quality Score: being above average pays off

Hacking Google’s Quality Score Formula: blog post & webinar

+ +++

++

+ 1 = 10+ 1 = 5.5+ 1 = 1

Ad Relevance issues? Check out Bing Ads heat maps (SlideShare / image search).

… until it hurts your conversion rate.

Appendix

Appendix: Free Rules & ScriptsBy Chris Haleua:• 3x3 Performance segments presentation• Bid Rule playbook• Bid Rule template library• 3x3 Template• 3x3 Macro

AdWords Scripts collections & articles (there’s overlap):• RankHammer’s AdWords scripts compilation (over 140 scripts)• Koozai: 100 Google AdWords Scripts You Should be Using• FreeAdWordsScripts.com• Google Developers: AdWords Scripts Solutions• Search Engine Land: AdWords Scripts articles• Optmyzr Scripts• Brainlabs: AdWords Scripts articles• PPC Hero: AdWords Scripts articles

Appendix: Bidding ToolsFree:• Google’s own bid simulators• Combine these insights with the Tenscores bid calculator• And obviously all the bidding options within AdWords. Be sure to read their automated bidding

guides for search and display.

Mid Market ($10,000 - $100,000 monthly spend):• Acquisio• Adobe Media Optimizer Standard (not Premium, that’s enterprise)• Marin Professional

Enterprise ($100,000+ monthly spend):• Download this guide for a 50-page report on 9 enterprise paid media campaign management

platforms (Acquisio, Adobe Media Optimizer, Campanja, DoubleClick Search, IgnitionOne, Kenshoo, Marin Software, QuanticMind and SearchForce).

• Tough questions to ask 3rd party tools from Chris Haleua on slide 46 and slide 47 of his Hero Conf Philadelphia presentation.

Thank You!