• http://www.rimmkaufman.com George Michie

    Great piece, Andrew!

    We’re studying the simulator as well, looking for opportunities to make the trade off between margin percentages and margin dollars (a smaller margin percentage of a larger base yields more profit). We’re finding those opportunities to be few and far between for most clients.

    As you point out the slope of the curve tends to make downward moves more attractive for those looking to maximize profits.

    The problem with opening the auction is that as advertisers start playing with this function we change the landscape the simulator predicts. Google doesn’t plan to make updates more than daily, which may mean there will be a short window of time when folks can meaningfully use the tool before overuse makes the projections meaningless.

    Thanks for the excellent write-up

  • http://www.brickmarketing.com nickstamoulis

    Hi Andrew – This is a great article on the Google big simulator, you bring up many excellent points. One that sticks out to me is:

    “Looking at a simulation is just that. Changing bids is, in the end, a serious business. Think about the information, and act intelligently on it. Don’t “believe” everything you see.”

    I think this is so very important that many advertisers and clients truly don’t understand, it amounts to making decisions based on data not ego, hunches or anything else!

  • http://www.clickequations.com cdanuloff

    Great article Andrew – I wonder what the impact of ‘eligibility for additional auctions’ is on the number of clicks as the bid increases. Mr. Varian made a point of this in his post this week about conversion rate consistency, and it would have to apply here. So often what we may think is happening – our keywords are moving up or down and that is impacting volume – is not the only change going on. At the same time we’re being exposed to more or fewer queries (and their associated clicks) which makes assumptions about the meaning of these curves a lot harder. Agree it’s great to have and Kudos to Google for sharing, but we’re not transparent yet!

  • Andrew Goodman

    Well said Craig,

    “Eligibility for additional auctions” throws an added layer of complexity into the mix that isn’t particularly intuitive if we think about the auction purely in terms of position. Probably the old way of thinking is roughly accurate, but where it is not, the bid simulator gives us some direction as to potential changes & risks (volume-wise) up & down the bid ladder on any given keyword.