Search Marketing» Content Network Blog Posts – Epiphany Solutions Digital Marketing Blog

Google's Christmas Bonus

Steve Baker — Thu, 06 Dec 2007 17:09:45 +0000

What does Christmas mean to you? Carol singing? Eating too much? Morecambe and Wise repeats? GIving people nice presents, and getting socks in return? If your online business sells the sort of things people buy at Christmas, and you have a PPC campaign, it means high bids and high traffic volumes. There are a lot of people out there desperate to buy things, and a lot of retailers trying to cash in. So what should you be looking to do? Leave your bids alone, and slip down the rankings, but keep your profit per sale the same? Or increase your bids, and grab as many sales as you can, albeit with a smaller profit from each one? In short, what happens to your sweet spot if your competitors all increase their bids? And what happens if only one competitor does? I’ve put together three different situations, with different bids, conversion rates and profits per conversion. Then I looked at the correct strategy if

All of the competitors increase their bids by 50%
The competitor immediately below you increases his bid sharply, to move top.

The first thing to bear in mind is that the number of impressions has no bearing at all of the sweet-spot. If each position gets the same percentage of the clicks, then it makes no difference. In effect, if you double the number of impressions, you’ll double the number of clicks, the number of conversions, the cost and hence the profit, in every position. I’ve assumed that everyone has the same Quality Score here – it’s unlikely to make a major difference to the So, for the sake of simplicity, I’ve left the traffic volumes where they are. They’ll impact the total profit that you make, but not the most profitable strategy. Here’s the first scenario. Each conversion makes a profit of £100, the conversion rates are fairly healthy, and the cost per clicks are quite high.

Bid	Position	Impressions	CTR	Clicks	CPC	Cost	Conv. Rate	Conversions	Cost Per Conv.	Profit
£5.00	1	100000	8.0%	8000	£4.01	£32,080	4.0%	320	£100	-£80
£4.00	2	100000	7.0%	7000	£3.31	£23,170	4.3%	298	£78	£6,580
£3.30	3	100000	6.0%	6000	£2.81	£16,860	4.5%	270	£62	£10,140
£2.80	4	100000	5.5%	5500	£2.41	£13,255	4.8%	261	£51	£12,870
£2.10	6	100000	4.5%	4500	£1.86	£8,370	5.0%	225	£37	£14,130
£1.85	7	95000	4.0%	3800	£1.66	£6,308	5.0%	190	£33	£12,692
£1.65	8	90000	3.5%	3150	£1.51	£4,757	5.0%	158	£30	£10,994
£1.50	9	75000	3.0%	2250	£1.41	£3,173	5.0%	113	£28	£8,078
£1.40	10	60000	2.5%	1500	£1.26	£1,890	5.0%	75	£25	£5,610

This is the data for a typical month. The most profitable position is 5th, with a cost per click of £2.11, though 6th position is only marginally less profitable. What happens if everybody increases their bids by 50% for Christmas?

Bid	Position	Impressions	CTR	Clicks	CPC	Cost	Conv. Rate	Conversions	Cost Per Conv.	Profit
£7.50	1	100000	8.0%	8000	£6.01	£48,080	4.0%	320	£150	-£16,080
£6.00	2	100000	7.0%	7000	£4.96	£34,720	4.3%	298	£117	-£4,970
£4.95	3	100000	6.0%	6000	£4.21	£25,260	4.5%	270	£94	£1,740
£4.20	4	100000	5.5%	5500	£3.61	£19,855	4.8%	261	£76	£6,270
£3.60	5	100000	5.0%	5000	£3.16	£15,800	5.0%	250	£63	£9,200
£2.78	7	95000	4.0%	3800	£2.49	£9,443	5.0%	190	£50	£9,557
£2.48	8	90000	3.5%	3150	£2.26	£7,119	5.0%	158	£45	£8,631
£2.25	9	75000	3.0%	2250	£2.11	£4,748	5.0%	113	£42	£6,503
£2.10	10	60000	2.5%	1500	£1.89	£2,835	5.0%	75	£38	£4,665

Should you drop down the results page, or increase your bids? In this case, a bit of both. Your CPC has increased from £2.11 to £2.79, and you’ve dropped a position in the search results. Here, the higher cost of staying in 5th has more than outweighed the additional conversions that you’d get there, compared to 6th. On the other hand, leaving the CPC at £2.11 would have cut your conversions by more than half (compared to staying in 5th), which would cost you more in lost profits than it would save you in terms of cheaper clicks. Note that the profit appears to have fallen here, but that’s because I didn’t increase the traffic volumes. If the traffic doubled over Christmas, your profit in 6th position would be just under £20,000. One final note here – in this instance, if the bids increased by more than 15%, the correct position to appear in changes to 6th. To make it drop to seventh, the bids need to increase by a massive 70%. Interesting, but hardly conclusive. This is just one scenario, so let’s try another one. Here, the profit per conversion is lower – £60 – and the cost per clicks and conversion rates are also much lower:

Bid	Position	Impressions	CTR	Clicks	CPC	Cost	Conv. Rate	Conversions	Cost Per Conv.	Profit
£0.50	1	100000	8.0%	8000	£0.41	£3,280	1.2%	96	£34	£2,480
£0.40	2	100000	7.0%	7000	£0.36	£2,520	1.3%	91	£28	£2,940
£0.35	3	100000	6.0%	6000	£0.31	£1,860	1.4%	84	£22	£3,180
£0.26	5	100000	5.0%	5000	£0.23	£1,150	1.5%	75	£15	£3,350
£0.22	6	100000	4.5%	4500	£0.20	£900	1.5%	68	£13	£3,150
£0.19	7	95000	4.0%	3800	£0.17	£646	1.5%	57	£11	£2,774
£0.16	8	90000	3.5%	3150	£0.15	£473	1.5%	47	£10	£2,363
£0.14	9	75000	3.0%	2250	£0.13	£293	1.5%	34	£9	£1,733
£0.12	10	60000	2.5%	1500	£0.11	£162	1.5%	23	£7	£1,188

Here’s the scenario for a typical month. The optimum position is 4th, though 2nd – 6th is very flat. So it seems plausible that the impact of a big increase in bids would be greater. Again, increasing the bids by 50% for Christmas…

Bid	Position	Impressions	CTR	Clicks	CPC	Cost	Conv. Rate	Conversions	Cost Per Conv.	Profit
£0.75	1	100000	8.0%	8000	£0.61	£4,880	1.2%	96	£51	£880
£0.60	2	100000	7.0%	7000	£0.54	£3,745	1.3%	91	£41	£1,715
£0.53	3	100000	6.0%	6000	£0.46	£2,760	1.4%	84	£33	£2,280
£0.45	4	100000	5.5%	5500	£0.40	£2,200	1.5%	83	£27	£2,750
£0.33	6	100000	4.5%	4500	£0.30	£1,328	1.5%	68	£20	£2,723
£0.29	7	95000	4.0%	3800	£0.25	£950	1.5%	57	£17	£2,470
£0.24	8	90000	3.5%	3150	£0.22	£693	1.5%	47	£15	£2,142
£0.21	9	75000	3.0%	2250	£0.19	£428	1.5%	34	£13	£1,598
£0.18	10	60000	2.5%	1500	£0.16	£243	1.5%	23	£11	£1,107

The results are similar to the ones in the first scenario – you increase the bid, but not enough to retain 4th position in the results. To make 5th the optimum position here, the bids need to increase by a factor of 35% – 82%. Here’s one more scenario – in this case, the profit per conversion is low – £15, the conversion rates are very high and the bids are moderate.

Bid	Position	Impressions	CTR	Clicks	CPC	Cost	Conv. Rate	Conversions	Cost Per Conv.	Profit
£1.00	1	100000	8.0%	8000	£0.81	£6,480	10.0%	800	£8	£5,520
£0.80	2	100000	7.0%	7000	£0.61	£4,270	11.0%	770	£6	£7,280
£0.60	3	100000	6.0%	6000	£0.51	£3,060	12.0%	720	£4	£7,740
£0.40	5	100000	5.0%	5000	£0.31	£1,550	13.0%	650	£2	£8,200
£0.30	6	100000	4.5%	4500	£0.26	£1,170	13.0%	585	£2	£7,605
£0.25	7	95000	4.0%	3800	£0.21	£798	13.0%	494	£2	£6,612
£0.20	8	90000	3.5%	3150	£0.16	£504	13.0%	410	£1	£5,639
£0.15	9	75000	3.0%	2250	£0.13	£293	13.0%	293	£1	£4,095
£0.12	10	60000	2.5%	1500	£0.11	£162	13.0%	195	£1	£2,763

Again, in this example, 4th is the optimum position (I’m not suggesting that this is always the case – it’s just convenient when comparing the results from different scenarios). Once more, here’s what you get when you increase the bids by 50%.

Bid	Position	Impressions	CTR	Clicks	CPC	Cost	Conv. Rate	Conversions	Cost Per Conv.	Profit
£1.50	1	100000	8.0%	8000	£1.21	£9,680	10.0%	800	£12	£2,320
£1.20	2	100000	7.0%	7000	£0.91	£6,370	11.0%	770	£8	£5,180
£0.90	3	100000	6.0%	6000	£0.76	£4,560	12.0%	720	£6	£6,240
£0.75	4	100000	5.5%	5500	£0.61	£3,355	13.0%	715	£5	£7,370
£0.45	6	100000	4.5%	4500	£0.39	£1,733	13.0%	585	£3	£7,043
£0.38	7	95000	4.0%	3800	£0.31	£1,178	13.0%	494	£2	£6,232
£0.30	8	90000	3.5%	3150	£0.24	£740	13.0%	410	£2	£5,402
£0.23	9	75000	3.0%	2250	£0.19	£428	13.0%	293	£1	£3,960
£0.18	10	60000	2.5%	1500	£0.16	£243	13.0%	195	£1	£2,682

Once more, the conclusion is a kind of half-way house. You increase your bids, but not by enough to maintain 4th position. In this case, the range of bid increases for which the 5th spot is the optimum is 38% – 159%. So what are the conclusions here? In all of these cases, an increase in bids of 50% led to the sweet spot dropping by one position. But this isn’t the whole story – an increase in bids of 30% would have resulted in the sweet spots in the last two scenarios remaining in the same place. And an increase of 100% would have led to the first two sweet spots dropping by two places. So, to a certain extent at least, the impact on your optimum bid depends on your particular circumstances. However, there are two conclusions that are true in every scenario I could think of:

You should never reduce your bids.
You should never move further up the search results.

So your new bid is bounded by two values, the amount required to retain your old position, and your old bid. At what point between these two values you should set your bid depends on individual circumstances. One further point here – if you see the conversion rate increasing in the run up to Christmas, then there is clearly scope to increase your bids, and possibly your position within the search rankings, as the value of a click increases. Similarly, if your average order value increases, then your clicks become more valuable, in which case you may find your sweet-spot moving up. At the start of this blog, I asked two questions. All of the work so far has been based around a scenario where everyone increases their bids. But what happens if only one competitor does. If their increase doesn’t affect your position (they were above you before they increased their bid, or below you even after increasing their bid) then it makes no difference at all. Your sweet spot will not change at all, barring very unusual circumstances. If they move above you, then there are two possibilities – you can either increase your bids to retain your old position, or you can leave your bids alone, and drop one place in the search results. No other option makes any sense, if you think about it. Regrettably, there is no absolute answer to this one. However, in the vast majority of cases (including the three from earlier) the correct decision is to leave your bids where they are, and drop down one position in the search results. The company that has made this decision has made their campaign less profitable, as well as a number of other people’s campaigns. All of which leads to the conclusion hinted at in the title of this blog. Whenever competition on keywords rises, and people start a bidding war, Google makes more money from PPC. But then, Christmas is all about giving, and not receiving…

When The Adwords Sweet Spots Turn Sour…

Steve Baker — Thu, 18 Oct 2007 08:42:47 +0000

I blogged a while back about the sweet spot for your campaign, and how to find it.Basically, you estimate the conversion rate, cost per click and clickthrough rate for each position that your advert can appear in, and calculate how profitable each one is. You should find that one position is more profitable than the ones above or below it, and so this is where you should be putting your advert. Which is all fine and dandy. But the other day, I was doing some forecasts and my profit curve looked like this: Clearly, I’d made a mistake! So I went back, and checked my forecasts for the clickthrough rate, the conversion rate and the cost per click. Here they are… I’ve changed the actual figures, but the result is the same. With a profit per conversion of £300, this gave me an inverted profit curve. Assuming that the cost per click is higher for higher positions, the conversion rate is lower or the same for higher positions, and the clickthrough rate is higher for higher positions, the profit from each conversion must be higher in lower positions. In my case, the conversion rate was clearly higher, the lower my advert appeared. If this effect outweighed the increased number of clicks that I got in a higher position, then it’s possible that I’d predicted that I’d get more conversions in a lower position than in a higher position. For example, if 5th place generated 5,000 clicks with a 3% conversion rate, and 6th position generated 4,000 clicks with a 4% conversion rate, then 5th place would generate 150 conversions, and 6th would generate 160 conversions. Clearly this is a danger when forecasting, particularly if you extrapolate beyond the range of your data. I can’t accept that you can get more conversions from a lower position in practise unless you have a restrictive budget (which I didn’t), so I looked at my data to see if this was the problem… So that’s not the problem. Finally, I looked at the profit per conversion, the number of conversions, and the product of the two (the total profit). The number of conversions is lower in lower positions, the profit from each is higher, and you get this ‘inverted’ profit curve – a ‘sour spot’. So, the question is whether this is possible in reality, or if it’s just a flaw in the forecasting method. The answer is surprisingly simple once you think about it. If you advertise in a very low position (say, 100), you’ll get almost no conversions, and hence make almost no profit. The true shape of this curve would probably be something like this: It’s possible that multiplying these two monotonic functions (conversions and profit per conversion) can generate two turning points in your profit curve – a maximum and a minimum. I can accept that this is possible, and graphs of the above shape will have a sweet-spot of either 1st or the local maximum (in the above example, 6th). This raises one final question. In the above example, I looked at the top six positions, saw the sour-spot and understood that I needed to extrapolate further. But if I’d only run the advert in positions 3 to 8, I would have seen a sweet-spot, and thought no more about it. In this case, I’d still (just about) have the correct sweet-spot, but another time, I may have missed out on potential profit. And perhaps I have done. My conclusion is this – extrapolate your data as far as possible, limiting your graph only at your total budget. See if this kind of shape is a possibility, and investigate it.

Small Budgets And Big Keyword Lists

Steve Baker — Tue, 18 Sep 2007 14:55:16 +0000

I recently saw somebody describing their campaign on a forum. They said that they had 250,000 keywords, and were concerned that Google may ban them.

Really, this was the wrong question – what they should have been asking was how they could possibly manage a campaign with 250,000 keywords.

Do a few sums, and you see what I mean. Suppose that a typical click costs £0.20. How long do you need to run a keyword before you can hazard even a rough guess at its conversion rate? 100 clicks? If you’ve got a low conversion rate, even this may not be enough. But to get 100 clicks on 250,000 keywords, at £0.20 per click would cost £5,000,000. And how long would you have to wait to get 25,000,000 clicks anyway???

Realistically, the majority of these keywords would get no traffic at all, and 90% of the clicks would come from 1% of the keywords. So you can still optimise the keywords that get the vast majority of the traffic, so the problem isn’t that big an issue.

So what about the other 99% of the keywords? If you can’t optimise them, then what’s the point in bidding on them – they may never be profitable! On the other hand, people keep saying that ‘the long tail’ is the key to successful PPC campaigns.

The above example is quite an extreme one – most campaigns won’t have 247,500 keywords generating very little traffic. But the 90%, 1% issue is probably true of most campaigns. If a handful of big keywords eat your entire budget, how will you ever make the other 99% profitable? They’re supposed to be the most profitable in general, with their low cost-per-clicks and their high conversion rates…

One option would be to pause the big keywords, and spend your entire budget on the smaller keywords. This will, in turn, lead you to find that 90% of your traffic is STILL coming from 1% of your keywords, as the largest of the keywords you didn’t pause take most of your budget. These keywords are probably more profitable, but it doesn’t really feel very optimal!

If you’ve read through my case study you can see how I would go about this problem in most cases.

My keywords are generally grouped by product or service, with extra Adgroups for the more generic groups of terms. So in the case study, I had one Adgroup for each printer, one for each printer type/manufacturer etc.

Then I optimised at Adgroup level initially. I optimised this by trying to equalise the ROI from each Adgroup, such that the total daily budget lasted (on average) just until the end of the day.

This should maximise the number of conversions that you get per day.

Having done this, I look within the Adgroup that’s getting the most traffic, and start adjusting the bids on the keywords that generate the majority of that traffic, looking at the ROI again.

If you have a situation like the printers, where the products are largely similar, once you’ve got a few Adgroups done, you can see patterns emerging. Certain keyword formations will perform better or worse than others. So you can make the adjustments to Adgroups even without having enough data individually. This is quite good, as you can have a stab at optimising keywords that haven’t got enough traffic.

I would also do one more thing here. If a keyword’s had no clicks after a month, I’d delete it. Even if you get a 5% conversion rate, if a keyword gets a couple of clicks per year, it’s not important; it’s just cluttering up your campaign.

Just be aware that there are clear limitations to this approach. Just because a group of keywords works on printers doesn’t mean it’ll work on photocopiers, telephones or PC’s.

Consider again the campaign that I mentioned at the start of this post. He was promoting a worldwide hotel booking service.

Clearly, the approach is likely to be valid here. If “Hotels in Moscow” converts better than “Moscow Accommodation”, then it’s likely that “Hotels in Durban” will convert better than “Durban Accommodation”.

It’s likely that each city has exactly the same keyword list, with just the city name varying. This is a huge opportunity to save a fortune when optimising. Rather than just switching the whole thing on from the start, why not work out using a few cities which keywords are profitable or not, and how much to bid for each type of keyword? Rolling this out on the others would give you a huge head-start, saving you a lot of money.

But if it works here, why not use this approach for any campaign where you have the same keywords in each Adgroup with just a different model number/city?

Sadly, it’s not really something that I can do, in my position here. When a client asks us to start up a campaign on their behalf, they expect us to build it and switch it on ASAP. After all, one of the main benefits of PPC is the immediacy of the results. You turn on a campaign at 9am, and at 9:02, you’re getting clicks.

But if it was my money on the line, and I had a lot of keywords, and only limited cash, I’d probably use this method.

What do you think? Is this better than the ‘throw everything at the wall and see what sticks’ approach? Give me your thoughts or experiences…

Should You Put The Content Network Into A Separate Campaign?

Steve Baker — Fri, 31 Aug 2007 07:00:20 +0000

The answer to this question should be yes. After all, that way you can easily monitor it’s performance as a whole (rather than produce a separate report for it, or having to flick through your adgroups all the time). Also, you may find that different advert text works more effectively on the content network – creating a new campaign allows you to write an advert for the content network, and one for the search network. So that should be that then. But it’s not quite that straightforward. I recently took over the management of a campaign that was running on both the search and content networks. Thinking that this would be a good opportunity to assess the size of potential benefits from splitting the networks into separate campaigns, I did so. The result was disastrous! They had been receiving 80% of their traffic through the content network, and most of it disappeared! Slightly disappointed, I switched everything back. But the traffic didn’t return. So what went wrong? Well, it appears that Google’s content network uses different variables in its Quality Score, or at least puts very different emphasis on the different factors. Specifically, it appears to use the age of the campaign (or, to be more precise, the length of time that it’s been on the content network). So, the longer your campaign is running on the content network, the greater its exposure appears to be on the content network. And if you turn off the content network, when you turn it back on, you’re back to square one. This doesn’t strike me as particularly sensible, though I can see why Google might be doing it. If a campaign isn’t working on the content network, then it gets switched off quite quickly. So the fact that it’s been running for a while is a good indicator that it’s what people are interested in. Remember that the clickthrough rate is virtually useless on the content network, as it highly sensitive to things like the location of the adverts on the page. So what’s the correct move, then? I’d say that if you’ve got a successful, established campaign on the content network, then LEAVE IT ALONE!!! If you’ve just started out on the content network, or you are considering it, then you can certainly give it a campaign and budget of its own. My campaign has now recovered to about 45% of its former traffic. Don’t make the same mistake that I did.