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  1. #1
    Full Member 212TomTom's Avatar
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    Google gouging us on minimum bids??
    Can someone please help me understand something? I'm bidding on a keyword term that, when searched on in Google, returns only 376,000 results, and only displays 5 paid ads (adwords ads) on the right side of the results.

    Based on that data, it would seem to me that there isn't much competition for the keyword term I'm bidding on. My landing page is very focused on that particular keyword, and one of the terms is even in the URL twice.

    All that being said, Google still requires a minimum bid of $1 in order for that keyword term to be active for searches. It seems to me that with so little competition (the 5 Adwords ads that did show up in a search) and so little results even (376,000 actual search results) that the keyword term wouldn't cost so much.

    And for another keyword term, Google wants $5 for an active bid, and there are only 3 Adwords Ads that show up for search results for it.

    Anyone have any ideas as to why Google would want such a high bid for a keyword, when they don't even have a full screen of Ads displaying when it is searched on? Unless the very few Advertisers that do have ads showing are willing to pay that much for bids (which I may be mistakenly assuming that they would notice the extreme lack of competition and not bid so high) why else would the minimum bid be so high?

  2. #2
    Classic Rocker Mack's Avatar
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    Good thread, good links, great info. Although not your exact situation, it is similar and the information will help. Pay close attention to Donuts comments.

    http://forum.abestweb.com/showthread.php?t=98348

  3. #3
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    It all depends on your competitors bids, your ads quality score and visitor satisfaction.

  4. #4
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    Seeing only five ads is NOT an indication that there are only five advertisers bidding. Google adjusts the number of ads shown based on performance, and sometimes shows only 2 or 3 ads even though there are dozens of advertisers with ads "active" for that keyword.

    My understanding is that Google's algorithms seek to optimize the "effective CPM" for each page of search results.

    Suppose there are 10 advertisers, with these bids and average click-through ratios for the keyword being searched:

    A $1.00 0.9%
    B $0.90 1.1%
    C $0.75 1.5%
    D $0.60 1.0%
    E $0.55 0.4%
    F $0.40 1.5%
    G $0.31 1.1%
    H $0.20 2.0%
    I $0.09 1.5%
    J $0.05 3.0%

    If Google only analyzed bid rates (like the old Overture system), then the ads would be shown in bid-order, in the sequence above.

    But Google looks beyond bid rates to "eCPM" and thus the actual display sequence for these ads would be:

    C $0.75 1.5% $0.0113
    B $0.90 1.1% $0.0099
    A $1.00 0.9% $0.0090
    D $0.60 1.0% $0.0060
    F $0.40 1.5% $0.0060
    H $0.20 2.0% $0.0040
    G $0.31 1.1% $0.0034
    E $0.55 0.4% $0.0022
    J $0.05 3.0% $0.0015
    I $0.09 1.5% $0.0014

    The last column is the computed "eCPM" for each ad.

    And then Google looks further. It tries to determine what impact the display of each ad has on the other ads, when shown in each position. (Average CTR generally drops with position, so Google's algorithms need to compute or estimate the likely CTR for each ad in each ad position. It might even determine that displaying a lower-value ad first will result in higher overall revenue, because it increases the total volume of clicks from the page.)

    In this case, the first 5 ads shown have eCPMs of $0.0060 or higher; Google probably would determine that if it shows only those five ads, then each of these ads would get more clicks than would occur if it showed 10 ads -- and thus, by NOT SHOWING the lower-value ads, Google would earn more money. (Every click diverted from B's ad to H's ad would cost $0.70.)

    In this specific example, I would expect Google to show only the first 3 ads (C, B, and A).

    Finally, it's crucial to recognize that Google's algorithms are not designed to be perfect, and they actually include some amount of "experimentation" and "randomness" as the algorithms test the validity of various assumptions. And of course, there is obviously some manual adjustment going on, for some keywords.

  5. #5
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    Correction to my prior post: the right-hand column in the second list doesn't show eCPM, but effective cost per adview (I should have multiplied by 1,000 to generate the eCPM).

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