Understanding Keyword Bidding in Google Ads

Bid scenarios for key phrases and campaigns without accumulated statistics

What to do if there are no statistics, and you need to launch a new advertising campaign? In this article, we have collected possible bidding scenarios without accumulated statistics.

What to do if there are no statistics, and you need to launch a new advertising campaign? In this article, we have collected possible bidding scenarios without accumulated statistics.

At conferences and in articles, there are many cases on optimizing advertising campaigns from the category “it was bad, but it became good”, “there was CPO X, but now X / 2”. In these cases, speakers and specialists, as a rule, operate with cases when the statistics have already been collected, CR is known, and microconversions are performed. But what if the advertiser has never launched an ad or opens a new direction? How, then, to set optimal rates in terms of business indicators?

In this article, we will tell you how a fair bid is calculated for keywords for which statistics have already been collected, and what to do if you need to launch an advertising campaign from scratch or add new semantics.

To begin with, let's deal with the terminology: we will operate with the concepts of "write-off cost per click" and "bid".

The price charged is the amount that will be charged by the advertising system at the time of the click. A bid is the amount that you need to assign to a keyword in order for it to participate in the auction and show up in a particular position.

We will call the calculated values of the CPC charged and, as a result, the bid that correspond to our business goal, “fair” or “sincere” - these are synonyms.

When everything is known

First, let's look at a scenario in which we bid for words or groups with accumulated statistics - to illustrate the formulas that

For projects focused on CPO and CPA, the fair write-off CPC can be calculated using the formula:

Bid = CR words * target CPA

Let's look at an example:

There were 100 clicks and 2 conversions, i.e. CR = 2%

Target CPA of the client = 600 USD.

Now we can find the rate using the formula:

0.02 * 600 = 12 USD.

12 USD is the optimal cost per click.

If your key metrics are ROI or DRR , then the formula needs to be changed. They will look like this:

DRR and ROI are indicated not as a percentage, but as a number: for 60% - 0.6, for 250% - 2.5.

When the write-off price has been calculated, a coefficient in the range of 1.15–1.2 can be applied to it.

As a rule, the rate in contextual systems is always higher than the actual cost per click. Therefore, we need to add a "margin" so that the resulting write-off price is not less than what we can afford.

Another option is to compare the calculated fair price with the click price for the position in the auction we are interested in. If the deviation is small, you can set the forecast rate of the system for this position.

When there are no statistics

The bid formulas above are not purely applicable to situations where we are talking about new keywords, new launch region, new product or category. The reason is that at the first stage, the statistics needed to calculate the rate simply do not exist. In such cases, you can use other approaches to calculate the fair CPC.

Total rate for all keys for a set of statistics

A single, high bid for all new keywords is an easy way to get your initial set of statistics. However, we do not recommend it, since the value taken "from the ceiling" is often set. As a rule, it has nothing to do with the economy of the project, nor with the auction of the advertising system.

Bet on entering the block above the search results

This is also an easy way to collect statistics and evaluate performance if you have a budget for the test. But, most often, the test has a limited budget or several tests are running at the same time, so it is important to reasonably limit the cost of new words and campaigns in order to fit into the advertising budget.

Calculation of the rate from the average conversion

In the absence of statistics on new keywords, you can use related statistics for other campaigns, regions, product categories, based on the formulas given in the first block.

Average conversion of a running campaign

This method is suitable if a previously launched campaign is simply supplemented with new keywords. In this case, you can use the average campaign conversion to calculate the bid.

Formula for CPA:

Average conversion of a product or service category

If an advertising campaign is not launched for a product category, but there is traffic from SEO, you can use the CR of the landing page.

A common way to calculate bids when working with multi-page resources is to take the average conversion of a landing page to calculate the bids for new keywords leading to it. Works well for category and product advertising of online stores.

Formula for CPA:

Average account conversion

If the product category is new and there are no statistics for it, you can use the CR of the entire ad account minus branded campaigns.

With this approach, there is a risk that the CR of different categories will be seriously different. But when you first run RK to evaluate traffic and CPC, this is a working option.