AdWords Basics: Bid Types

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PPC equation - clicks equal conversions

Google AdWords users spend money every time their ads are viewed or clicked on by users. The basics of cost-per-view (CPV) and pay-per-click (PPC) advertising are relatively simple to grasp, but choosing how often ads appear and how much should be spent on each view or click requires a deeper understanding of bid types. In AdWords, there are three kinds of bid: cost-per-click (CPC), cost-per-thousand impressions (CPM) and cost-per-acquisition (CPA). When should a certain type of bid be chosen?

CPC

The principal objective of many an AdWords campaign is to drive traffic to a website. And that means encouraging people to click on ads. Sometimes using a third-party PPC tool can improve results, but Google provides account managers with plenty of control over their bidding options, as well as plenty of Google AdWords help on the matter. CPC bidding is effective when advertisers want to maximise clicks rather than impressions or conversions.

In AdWords, advertisers can choose between automatic and manual CPC bidding. The former is the quickest to set up and the easiest to manage, as AdWords automatically adjusts CPC bids to maximise the number of clicks that are generated each day. Automatic bidding operates within the limits of a daily budget, as specified by the account manager.

Manual bidding is useful for account managers who want to retain complete control over CPC bidding. Rather than relinquish control to AdWords, account managers can decide exactly how much money they want to spend on each click. The cost of appearing in ad auctions changes throughout the day, so this option will not necessarily result in the highest number of clicks, but it should ensure that a budget is used effectively; for example, by investing more money in some keywords than others. Manual CPC bidding can be applied to placements, keywords or ad groups.

CPM

Sometimes clicks are not that important. Brand recognition can be everything to some firms, which is why AdWords provides a bidding option that charges by the frequency with which an ad is displayed. Unlike CPC bidding, which charges by the click, CPM bidding focuses entirely on how many times an ad appears on the Google Display Network (for ‘All features’ and ‘Remarketing’ campaign types). CPM rates are linked to every thousand impressions, so whatever bid is chosen will be the cost per 1,000 ad appearances.

Because CPM bidding focuses on impressions, not clicks, account managers should only choose this option if they want to promote a brand, offer or message to as many people as possible. Clicks ought to be a secondary concern.

CPA

To many AdWords account managers, clicks and impressions are nowhere near as important as conversions. A conversion can be a sale, subscription or page view. CPA bidding allows the account manager to establish how much money should be spent on each conversion. But they are still required to pay for each click. CPA bidding aims to increase the number of clicks that are likely to result in conversions.

To benefit from CPA bidding, account managers must activate conversion tracking in AdWords. This type of bidding is likely to cause the most confusion among account managers, especially those who lack experience, but it often succeeds in generating more conversions.

Paid search news from BidCops – the Google PPC tool.

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