Bid vs. Pay: A Case for Automated Optimization

Optimize” is one of the most overused words in the PPC world. We all know that if you’re not optimizing your search and display campaigns, you aren’t managing PPC correctly. But for many search marketers, there is no way to optimize accounts, simply because a vital piece of information is missing from AdWords that makes it nearly impossible to optimize campaigns manually.

Without this information being displayed and reported in AdWords (as well as other publishers and PPC platforms), it is impossible to strategically set bids to hit pay targets.

This is a pretty big deal. Worst of all, most marketers are not even aware this info is missing!

The information absent from AdWords, which is vital in plotting a course towards pay targets, is bid history. With the help of Bryan Minor, Chief Scientist at Acquisio, the confusion concerning bid data is clarified and he presents the only solution to effectively optimize search campaigns without this data – automation.

Missing Bid Data

“In AdWords, the only values shown for bid are the current values,” explains Bryan. That means that when you see your data view in AdWords for the last 30 days, the bid you see as the “Default Max CPC” is your current bid:

bid vs pay

Scroll over that bid and you’ll see that you can edit it. For current data, where pay and conversion data displayed correspond to that bid, there is no issue. But for campaign history, seeing the current bid next to past data that used a different bid entirely is troubling.

For last month’s data:

bid vs pay

Notice the bid values are exactly the same as the last screen, which showed data from a completely different month. While it may have seemed, at first glance, that the bid presented in the data view corresponded to the date range selected, it actually has no relation. Scroll over the bid and see that you can still edit it. It is still your current bid, only now it is set against the landscape of your previous month’s campaign history. Very misleading…

So where the heck is the history of bids? How can you know what your bids were last month and how can you determine what to set the bids at in the future without this info? The sad fact is this information is never displayed, in any ad publisher, and it cannot be searched for or retrieved.

Unless you manually track the bids in correlation to what was paid (CPC) by checking the changes to bid and pay everyday and recording that data in an Excel spreadsheet, you can never make an informed connection between bid (max CPC) and pay (CPC) in order to see what generates the most conversions.

Why Do You Need Bid History Anyway?

What matters most in your ad campaign is what you pay because an optimal cost per click can help maximize budget, increase conversions and cut cost per conversion. No matter what your company is advertising, this is the goal.

To reach those PPC goals, pay is an integral part of the strategy so hitting your pay targets is crucial for campaign success.

Because PPC is an auction environment, you cannot adjust pay directly. You can only make adjustments to your bids, and those bid adjustments, in combination with your quality score, competitors’ bids and other factors will determine what you actual pay per click.

All the inputs for manual optimization are related to bid, while all the data you see and care about in AdWords is in terms of pay. The relationship between the input, Bid (independent variable) and output, Pay (dependent variable) must be understood in order to effectively optimize campaigns. Without bid history to do time-based analysis, it is impossible to see, let alone understand that relation.

In AdWords today, there is no ability to do time-based analysis of Bid:

pay vs bid

There is ability to do tabular values for a fixed date range for Pay values:

pay vs bid

But there is no ability to do comparable Bid analysis.

Since there is no effective way to manually manage the Bid and Pay relationship with the provided data and controls, PPC marketing without automated optimization involves a lot of guesswork.

The Pay vs. Bid Relationship

The bid is set as the maximum an advertiser is willing to pay for a click or conversion, similar to the way a person would bid on an item they want to buy on eBay. Often times that maximum bid is not what the pay ends up being. More often than not, according to Bryan, “the advertiser pays a fraction of the bid price, commonly half the bid.”

Here is an example:

bid vs pay

The bid, set on the left, is nearly twice what was actually paid for the click.

For an advertiser who wants to pay less than $1.00, a bid of $5.00 is nothing to be scared of. Because Google’s means of determining CPC are too difficult for marketers to break down manually, only automated optimization tools like Acquisio’s Bid & Budget Management tool (BBM) can effectively set and adjust bids to reach target CPCs. If BBM’s algorithms say $5.00 will generate a pay of $1.00, a bid five times higher than the target CPC is nothing to stress about.

But this relationship is never a straightforward one – pay is not always half of bid, or a fifth of the bid, and there is no clear way to calculate what pay will come from what bid. The difficult and complex mathematical formula marking the relation between bid and pay becomes near impossible to do manually given the lack of bid history data necessary to make these calculations.

So how can you know what bid will allow you to hit your target pay? That’s where automation comes in.

A Case for Automation

With automated optimization, every bid change and every fluctuation in pay is recorded, automatically, behind the scenes. The recorded relation between bid and pay enables the automated system to learn from each bid change and get closer to reaching the ideal pay target faster than humanly possible.

With Acquisio’s automated bid adjustment tool, unlike all other automation tools which update daily, the Bid & Budget Management solution updates every half hour, so small bid changes are made throughout the day in accordance with the most recent auction data.

By learning from each bid adjustment and correcting and improving the bids set with each change, the target pay can be reached faster – 48 times faster than other optimization tools. Often targets are met within the first two days of implementing the solution within your campaigns and accounts.

You may not be able to see the bid and pay relationship, but that information is being tracked and utilized automatically and your campaigns can truly be optimized to hit pay target to help maximize budget, get more conversions and lower CPC and CPA.

Without automatic optimization, this can’t be done and whatever you call “optimization” would likely be much less effective at converting leads and improving sales. There’s no stronger case for automated optimization than this.

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Jillian Zacchia

Jillian Zacchia

Jill is a professional writer, editor and social media procrastinator. With a degree in Literature and Communications from McGill, she started her journalism career writing about lifestyle and entertainment for teen magazines, and after dabbling with wedding and travel writing she began the transition towards content creation for start ups, marketing and tech companies.

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