Is Your Brand Bid Too High? Don’t Pay More Than You Have To!

Many advertisers display ads through Google AdWords for their own brand and/or their company name. This is a sensible move, since much more individualized and targeted information can be displayed through an ad than through the organic search results. An additional benefit is that the cost per click for these “brand” ads is generally extremely low due to the lack of competition. Nonetheless, AdWords campaigns containing home brands offer even greater savings potential, which is demonstrated in our test below.

I’ve taken a closer look at the brand bids on behalf of a very large European fashion retailer. With a bid of £2.00 for the exact keyword, the average cost per click (CPC) came out to 11 pence. That’s a bargain on its own, but with a daily average of 80,000 clicks, it still results in a considerable cost factor of £8,800 a day.

So, I decreased the bid every two days and kept an eye on both the average CPC and the impression share. Here’s what I observed:

Table development cpc

As you can see, at a bid of £1.00, the CPC went down by 1 p, and at a bid of £0.40, the CPC sank to 9 p.

Lineares Diagramm Entwicklung CPCThe impression share, however, has remained almost constant. Considering that monthly Ad Spending can be brought down by £48,000 (80,000 clicks * 30 days * £0.02) for the same performance, it’s clear that this test was very worthwhile for our customer.

Background: The Google Bidding Mechanism

In the example above, did you also wonder how one could pay as little as £0.11 per click for a £2.00 bid? This is due to the fact that Google’s bidding mechanism is essentially a Second Price Auction. This means that everyone pays “just enough to beat the Ad Rank of the advertiser with the next highest Ad Rank (or the minimum Ad Rank necessary to appear in that position).” (Source: AdWords Help).

Put very simply – and assuming that the ad quality and Ad Extensions are the same – we can imagine the auction as such: Everyone pays the bid of the next-highest bidder, plus 0.01. If you would like to take a closer look at this process, I highly recommend this AdWords Help article, including the video by Hal Varian:

Bids on exact keywords for your own brand are a special case, since there is generally only one bidder. The bid is calculated based on the “minimum Ad Rank necessary to appear in that position.” So, what does that mean? Google doesn’t divulge much detail. In my experience in the German-speaking market, the “minimum bid” for brand auctions with a single bidder typically falls between €0.03 and €0.15. This wide range can largely be attributed to quality factors represented by the Ad Ranks. For now, we can only speculate about the influence of other factors, such as brand recognition (search volume) or Ad Extensions (of course, one could always perform Reverse Engineering with elaborate testing).

What our test has apparently shown: the advertiser’s bid also has an effect on the actual CPC – even when the CPC lies well below the bid. This is a truly surprising result. Contrary to what we would expect in a second price auction, but as our example indicates, it’s not trivial whether we bid £0.40 or £2.00!

A Tip For Implementation: Lower Only The “Exact” Bid With The Help of Negative Keywords

If you want to get started lowering your brand bids right away, let me first pass along an important tip. Decreasing all brand bids would go hand-in-hand with a massive drop in traffic, and is therefore not expedient. Lowering the bid for the exact keyword alone can lead to problems with the Google system. However, using negative keywords is an effective workaround.

For example: In the fictitious “Lawedu” shop, there exists, among others, the keyword “lawedu (phrase)“. If we give the keyword “lawedu (exact)” a lower bid than the phrase keyword, sooner or later, the search term “lawedu” will trigger the phrase keyword (for which the bid is still higher). We want to steer clear of this.

So, we create a separate AdGroup for the keyword “lawedu (exact)” and enter “lawedu (exact)” as a negative keyword in all other AdGroups which contain brand keywords.

Have fun experimenting!

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Andreas Meyer

Andreas Meyer has been an PPC specialist since 2009. In the years since, he has been in charge of accounts of all sizes among diverse industries. As of 2014, he works as a PPC analyst in the Business Intelligence division. His areas of expertise are PPC account optimization and Google Shopping.