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

    Great post, Sid. We see this too, and speculate that the additional auctions those top ranking KW qualify for when bids are pushed get farther and farther afield in terms of broad matching. The conversion rate for the incremental traffic generated in these cases is horrendous.

  • http://www.cpcsearch.com Terry Whalen

    George, I agree. Broad match is a totally different animal and broad-match keywords warrant extra close attention – especially with bids.

    Adding negatives from search query data can help reign in risks of high bids on broad match terms.

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

    Terry, Sid, my cracker-jack analysts have informed me that I’m missing the point. What Sid is talking about, and what we’re seeing in the data impacts EXACT match keywords on Google.com only, too.

    In these cases we don’t see impressions increase much if at all, but CPCs do increase. Two thoughts: 1) the advertiser in position 2 engages in pre-Panama bid jamming activities when your bids increase; or 2) much more nefarious: Google sees the gap between the position 1 AdRand and position 2 AdRank increase, recognizes an opportunity to make more money, and draws in other high bid broad match terms to drive up the CPC. Why wouldn’t they do this all the time? Those broad matched ads are less relevant, giving a poor user experience which isn’t in there long term interest, but in the short term…

    #1 is more likely as #2 would be evil, and we know that Google isn’t evil.

  • http://www.cpcsearch.com Terry Whalen

    Good point – we’re talking about who is let into the auction for the search term – whether your own kw is entered into the auction for a particular query, and whether various competitors’ kw’s are entered into it. So, with an exact-match term Google doesn’t really have much flexibility on whether *my bid* is in the auction (given a reasonable bid and QS/CTR), but they still have plenty of leeway on whether other advertisers are let in (especially if those advertisers are using phrase/broad match).

    But I see much more “weird stuff” happening with broad match terms, since for broad match Google has so much leeway on which auctions they let *me* into.

    I have a hard time thinking that bid jamming is going on. I always thought the enabling factor was Yahoo’s disclosure of current advertiser bids. I’m thinking that: a) in order to bid jam, you have to know what bids are out there, and b) there’ s no way to know what bids are these days (screen-scraping won’t do it).

    Thoughts?

  • http://www.efrontier.com sidshah

    George, Terry; good discussion. The example I gave was for an exact match keyword. So yes, I am seeing this pattern for exact match as well as broad match. As Terry pointed out, Google doesnt have much leeway for your exact match but it can let in a really high bid broad matched keyword and mess up your CPCs. Essentially, the search engines are constantly making a tradeoff between (a) Increasing their profits and (b) Ticking off users with irrelevant ads (not to mention advertisers!). The end result is this observed behavior. What I also notice is that Google charges you a HUGE premium in going from avg. position 1.0X ( X is a number from 0 to 9) to 1.0 . I am going to discuss why in my next post.

  • http://rouletted.com/eu/it/ davidryan

    Thanks for the great post and i accept with this that the Broad match is a totally different animal and broad-match keywords warrant extra close attention especially with bids.

  • http://www.blackhatppc.co.uk BlackHat

    Really interesting article and is something we have been seeing a lot of recently. We have it from a Google insider that Google uses something we have called ‘smart pain’ where it changes it’s PPC algorithm to amend CPC’s for different forms of advertising – Search, Search Partners, Content, Mobile, etc.

    We have also seen how Google can change this part of it’s PPC algorithm between different countries depending on how expensive it wants Google AdWords to be when competing with other forms of advertising within different territories.

    We don’t believe that Google’s auction exists in the way that they want everyone to think it does. We believe they even have different categories of AdWords accounts and depending on which category your account sits, has an effect on what CPC’s you pay. How Google determine which category your account sits in is anyone’s guess, however, we think it’s to do with your onsite conversion rate as Google will send you more traffic and cheaper CPC’s if your site converts well in order to make advertisers happy and spend more with Google.

    One thing we are sure about is that as you have stated in your post, the way Google determines CPC’s in an auction is not as transparent as they lead everyone to believe.