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February 7th, 2008, 12:22 AM #1"Position preference" campaign option in Adwords
I'm looking at the 'Position Preference' option in Adwords, and wondering......
Why would anyone select anything other than the top positions in which to show their ads?
and if that's the case, what's the point of the option when Google already shows each ad in the highest position that the keyword qualifies for.
I can see it being used to prevent your ad from showing it it's anyless less that a certain position rating, but that's about it. (eg. only show my ad when the keyword ranks in positions 1 - 3)
Anybody care to volunteer any experience or knowledge of this option?
February 7th, 2008, 12:33 AM #2
- Join Date
- January 18th, 2005
To avoid the "idiot clicks."
Okay, that's an unfair description of what happens to the "first position listing" but it's the term I used 7 years ago when I first wrote about it.
What I discovered, while running PPC campaigns on GoTo/Overture (now part of Yahoo), was that we could afford to pay MORE for clicks in the second position than clicks in the first position. The reason was that many more people clicked "blindly" or "without reading" on the first link that appeared.
At that time, I was working with MovieGoods.com, and I described my efforts for the search phrase "movie posters." When I wrote, I changed some numbers, but essentially this was the result:
If we bid for the top position, we could afford to pay 27 cents per click and still have positive ROI. But if we were bidding only for the #2 position or below, we could afford to pay 37 cents per click and still have positive ROI.
What happened was that if the ad appeared in position #1, we might draw 1,000 clicks per day; if the ad appeared in position #2, we might draw 500 clicks per day. But the conversion rate for clicks on our ad in position #1 was significantly lower than the conversion rate for clicks on our ad when it ran in position #2. (I don't think there was a difference in average order size, but I can certainly think of reasons there might be.)
Bottom line: when we "did the math" we concluded that if we bid more than 27 cents for position #1, we lost money. But we could bid as high as 37 cents per click for position #2 (or 3 or below) and still earn a profit.
I believe I first wrote about this in early or mid 2001, writing in I-Sales Digest (an email discussion list operated then by John Audette, similar to the LED-Digest discussion list that continues today). Here's what I wrote in I-Sales Digest (apparently in Issue 1568, according to several pirates who reproduced the article without permission on their ad-laden web sites):
TOPIC: CONVERSION RATES FROM PPC SEARCH ENGINES
From: Mark J. Welch
Gary Salzman wrote:
> "Are there any studies, opinions or predictions on the cost difference in relationship to number of sales vs the cost of being ranked 1, 2, 3, etc on Overture? Such as Rank 1 costs 2.00/click, Rank 2 $1.99, Rank 3 $1.55, Rank 4 $1.54." <
I'm glad you asked this question.
The Overture bidder in position #1 for a specific term, will almost always draw more clicks than any other listing. But the ROI from those #1 clicks is lower than the ROI if the same listing appeared, at the same price, as listing #2.
I call this the "idiot click" problem, although a fairer term might be the "lazy searcher" problem.
The most extreme example I can offer is someone who searches for "Lolita" because they are looking for kiddie porn. The first listing (at one time) was a one-cent-per-click bid by MovieGoods.com, which sells movie posters and stocked the movie poster for the film "Lolita." The listing title was "Buy 'Lolita' Movie Poster from MovieGoods' and the description was "MovieGoods stocks 77,000 movie posters, celebrity photos, and movie memorabilia, including movie posters from the film 'Lolita.' "
None of the kiddie-porn seekers read the title: they just went ahead and clicked on the first link, discovered it was a page selling movie posters, and abandoned the site. We drew about 100 clicks per day, at a cost of $1 per day, from this one search term, and of course nobody bought anything. We deleted that listing.
Now, move on to a more practical example: MovieGoods sells movie posters, and thus it should not surprise anyone that it bids on the search term "movie posters." When I first launched the MovieGoods campaign at Overture (in early 2000), I bid on that term at various rates from $0.05 to $0.85, and the bid needed to hold the #1 position varied from $0.29 to $0.86.
One issue is that during the course of a day, our $0.33 bid might be in the #1 position for a while, and then someone outbid us and we found ourselves in #2 and as new bids come in we might get pushed down to #2 or #3. Thus, it's hard to know what position the term was in, when it was clicked.
But over time, I was able to analyze the difference from being in position #1 vs. #2 or #3 or "lower." And because of the "idiot click" problem, I found that we could actually bid HIGHER for position #2 than for position #1.
I can't share the "actual" figures, but here are some "ballpark" numbers that show the analysis.
First and foremost, my goal was to acquire customers through Overture while spending no more than 20% of gross sales on our bids. Thus, if I bid $0.33 per click, I had to be confident that on average, each clickthrough would generate $1.66 in sales -- or as a practical matter, if we paid $0.33 per click and our average Overture-driven transaction was $38.00, we had to see one sale from every 23 clicks).
If the MovieGoods listing appeared in position #1, we drew a lot more clicks, but the conversion rate was below 4%, or about 1 in 23 clicks. At that price, assuming an average transaction size of $38, we could only afford to bid $0.33 per click to hold position #1 at Overture. At any higher bid price, we did not generate enough sales to justify the spending. But if the MovieGoods listing appeared in position #2, our conversion rates were higher. We drew fewer clicks (and spent less money at Overture as a result), but instead of converting 1 out of 23 clickthroughs into sales, we converted about 1 in 18 clickthroughs to sales. As a result, we could profitably spend $0.43 cents per clickthrough to be in position #1, but if the #1 bidder dropped out, we had to lower our bid so we were either in position #2 again, or in #1 at $0.33 or less.
So to sum up: we could profitably pay up to 43 cents per click for ANY position other than #1, but we could only pay up to 33 cents per click for the #1 position at Overture. (The math has changed since early 2000, and since I quit as Chief Strategist at MovieGoods, I don't have access to the current numbers, but it appears that the company is bidding a little bit higher.)
Naturally, every type of search term will work differently. For example, MovieGoods sells movie posters, and sometimes bids at Overture on "movie titles" or "actor/actress names" (e.g. "Star Wars" or "Sandra Bullock"). For those terms, we almost never wanted to be in position #1 because most people who search for those terms are not looking for movie posters, and we absolutely did not want any "idiot clicks."
However, when bidding on a more specific term like "Star Wars movie poster" or "Fred McMurray pictures," MovieGoods is comfortable as the #1 bidder because the search term indicates a strong interest in the stuff MovieGoods actually sells.
At the opposite extreme, we found that if we bid for any position, even at one cent per click, on terms like "movie review" or "movie trailer," the bid was unprofitable.
Another way of looking at this is to admit that MovieGoods' products are "bought, not sold." If someone is looking for information about the Spider-Man movie, it's quite unlikely that we can convince them to buy the Spider-Man movie poster -- we just can't "sell" well enough to justify bidding aggressively on the movie title alone.
However, is someone searches for "Spider-Man movie poster," then they are showing a strong "buying" interest and so we want to appear highly-ranked in response to that search phrase (currently I see MovieGoods is bidding $0.16 and is in position #2 for that search term at Overture).
Some people are confused because they look at traffic levels. For the same search term, a 43-cent bid for position #1 might draw 500 clicks per day, while a 42-cent bid for position #2 might draw only 220 clicks. But the real measure is the "cost per dollar of profit," which should be less than a dollar. Most of us use a surrogate, such as "cost per dollar of sales" (and at MovieGoods, my benchmark was that I could spend only 20 cents per dollar of sales generated, assuming an average 20% profit margin, which of course was unfair since some products had higher margins and some loss leaders had less margin).
Finally, when "managing" your Overture campaigns, it's important to use your titles and descriptions not only to "sell" or "encourage" clicks, but also to "pre-qualify" clicks. Including price information, or the word "buy," will discourage clicks from people looking for cheap or free stuff (but in position #1 you'll still get those "idiot clicks").
And since not all of Overture's partners display the complete title or the complete description, it's important to put that pre-qualifying language at the beginning, not the end, of your title or description.
Mark J. Welch
Internet Performance Marketing Consultant
Last edited by markwelch; February 7th, 2008 at 12:58 AM.
February 7th, 2008, 12:41 AM #3
Wow! Thanks Mark. I never would have imagined that ranking in Position 1 would be less cost effective than lower positions.
I haven't quite yet been willing to pay for, or qualify for 'position 1' rankings but that's definitely something to think about.
I get your point about testing too, but hopefully can eliminate some of it via gems like the one you provided.
February 7th, 2008, 12:46 AM #4
- Join Date
- January 18th, 2005
FYI, bidding for position #2 or below is almost essential when you're seeking traffic from keyword-phrases with "multiple meanings."
For example, if you sell "grommets," you might discover that most searches for the word "Grommet" are actually looking for the animated short films or movies about "Wallace and Grommit" (such as "The Wrong Trousers" or "Curse of the Were-Rabbit"). In this situation, the people who are searching for your kind of grommets are likely to look beyond the top result to find the relevant listings; people looking for animation may just click the first thing they see, without even reading it.
And of course, if you sell a product in a category that includes many "free" products (legitimate or not), you absolutely don't want the number-one position. Even if you use "free" as a negative keyword, a huge portion of the people searching for "mouse pad" or "spyware software" or "MySpace templates" are really looking for free stuff, so you're almost certain to lose money if your paid listing appears in position #1 or even #2.
February 7th, 2008, 02:55 AM #5
Very interesting numbers Mark. Good analysis of web traffic, too. Thank you for posting this!
You might actually go as far as to conclude that it could be potentially more profitable "per click" if our affiliate sites were not the number one SERP placement but possibly 2 or 3. Certainly the first page of the SERPS, but avoiding the "idiot clicks" would look better in click to sale ratio reports and give us a better idea of the "power of search engines" and SEO in the affiliate or merchant arena. Certainly something to wrap our brains around.Peace,
Loving Everyone's Child Creates Magic
February 7th, 2008, 10:30 AM #6
Mark's right of course, sometimes the top spot can be less cost effective than other spots. Note I say sometimes, you gotta test to figure it out for each case.
There are also other ways to use this feature, especially if you're maxed out on your daily budget. It can be used to preferentially shift your spending to certain spots, up or down, depending if you're seeking higher CTR or improved ROI within those budget limits.
Very generally speaking though, affiliates tend to occupy middle and lower spots that are crammed up next to many other bidders (the middle & end of the pack's bids are denser), so affiliates will see less positive effects from using this tool that those who are in the upper positions. If you're low bidding and using performance to move your ads as high as you can (but usually not in top 3 spots) for your low bid and you're also not maxed out on your daily budget / spend, it's unlikely that you'll need this feature at all.
It can make for interesting experiments though, especially when you mix in some dayparting. In my testing, Mark's observations about "idiot" clicks aren't a constant factor throughout the day and are, of course, product and website design / theme dependent in ROI outcome.
I wouldn't let it distract you much though... your keyword's match types, the keywords themselves, your bids and your ad's content (and their grouping) are far more important than position preference.
February 7th, 2008, 11:08 AM #7
Adding to the comments by Mark and Donuts, I've found ROI to be at its best generally in the 3 - 8 positions depending on the offering. But the day parting option throws in some interesting variables too. I don't generally refer to #1 position clicks as "idiot" clicks but rather as "impulse clicks" - which are a result of reflex versus research. But the point is the same.
February 7th, 2008, 01:29 PM #8
We have also found the same to be true in organic search. Sometimes conversions on #1 slots are not as good as 2 or 3. We believe many of the clicks are from qualified viewers who want to see a selection of options before finalizing their decision. If they see the same basic deal on all of the first three sites the third might get the sale more often because there is no reason to leave that site to return the #1 slot.
We focus almost all of our efforts on SEO and organic search placement which eliminates your ability to determine placement.I would rather live my life as if there is a God and die
to find out there isn't, than live my life as if there
isn't and die to find out there is.
February 7th, 2008, 03:03 PM #9
Edit: I posted something here, but I think I need to do more testing before I can claim that it's true...
February 7th, 2008, 07:55 PM #10
February 7th, 2008, 11:19 PM #11Originally Posted by Alan Hamilton
Basically what I wrote was that the upper limit setting of the position preference is useless because it doesn't actually prevent your ad from appearing higher than that position (whereas the lower limit does prevent it from appearing lower). But that's just from my limited experience with it, so it's not like I can claim that it's useless in all circumstances.
February 8th, 2008, 08:39 AM #12
- Join Date
- January 18th, 2005
ghoti wrote:> "what I wrote was that the upper limit setting of the position preference is useless because it doesn't actually prevent your ad from appearing higher than that position (whereas the lower limit does prevent it from appearing lower). But that's just from my limited experience with it....
Yes and no.
First, it's important to recognize that Position Preference works only for Search, and not for the Content Network. And ads set for a position preference of 2-10+ (e.g. never show as #1) are sometimes shown in position #1. But I've certainly seen very significant differences when I switch a campaign from no position-preference to 2-10+.
Position preference should never be used "instead of" bid management to select position. I believe that your bid rate is always going to be the primary determinant of position. Thus, if you are bidding on a keyword where you need to bid 67 cents for position #1, and you don't want position #1, you shouldn't set your bid at 70 cents with position preference set to 2-10+ -- instead, you'd set the bid at some lower amount along with setting the position preference.
February 8th, 2008, 08:45 AM #13Originally Posted by markwelch
Would you be able to give more details on of how position preference #2-10 has worked for you? It still has me confused and I would love to figure it out.
February 8th, 2008, 09:34 AM #14
- Join Date
- January 18th, 2005
> "Would you be able to give more details on of how position preference #2-10 has worked for you?" <
What exactly do you want? I haven't conducted a scientific A-B test.
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