Keyword Bidding with Google Adwords' Bid Ideas

Adwords has a new feature called the keyword bid ideas that provides keyword bidding recommendations based on your keyword performance in the past. The keyword bidding feature helps advertisers either increase the number of clicks (raise bids) or reduce the costs (lower bids) of keywords.

How it works

Adwords uses the bid simulator to generate bid ideas. It looks at the keyword, its quality score, competition, past week performance and ICC (Incremental cost per click) to determine the bidding opportunities.

Advantages

* The information will help advertisers make better decisions in terms of identifying keywords which generate more revenue or cost more.
* The bidding system uses minimum and maximum thresholds to provide recommendations. This allows advertisers to make changes and not be affected by drastic changes to the performance of the account. (click here for more details).

Ex. When providing bids to increase clicks, Adwords won't propose a bid unless the change allows for total increase in keywords by 8%.

Similarly, when providing bids to decrease clicks, Adwords won't propose a bid unless the change allows for total decrease in cost by 8%.

Disadvantages

* The Adwords system uses only one week of historical data (i.e. previous week) to provide recommendations which certainly will not be the most accurate. The more data sample you, the better the recommendations will be. At least 2 to 3 weeks data sample would be most desirable to provide recommendations.
* Recommendations are based on clicks, costs, ICC and threshold limits only. This means Adwords doesn't take in to consideration the advertisers' value per click and ROI. So use of common sense and discretion is highly recommended.

How to use it

One way this feature can be used effectively is to determine what actions you can take with the keywords that cost more but don't have conversions. Depending upon the number of keywords you have, you can look at all or the ones with the most costs. Once you have determined the keywords, check to see if Adwords has provided bid recommendations for those keywords. Use those recommendations to make bid changes and analyze the outcome to gauge the tool's effectiveness in terms of your campaign goals.

Conclusion

Something is better than nothing. The recommendations are step in the right direction and Google is considering using ROI to determine bid changes. This is something we can expect in the future. Use the tool with discretion and test it to identify the most effective way of using it.