“Ok, so I’m going to start bidding low because I read on some super duper marketing blog that this is how to get my campaigns

serving and profitable.  But wait, there was another person who said I should start bidding low so I don’t lose my shirt. ”

 

Sound familiar?  When I first started running performance marketing campaigns, I had no idea how to properly approach bidding.

Of all the advice scattered across blogs and forums, my gut reaction when I was first starting out was to always bid the absolute bare minimum.  I would much rather play it safe and not lose any money before I started testing.  Then when I found what works through tracking, I could scale my bids higher.

Little did I know that bidding lower does not always mean increased profits.

Saving money by buying your products for a cheaper price…

Makes sense from a normal business standpoint, right?  But this logic does not work 100% of the time when you’re buying online traffic.

Let’s say Roger is bringing in $1,000 a day in profit while bidding $1.00 CPC on one of his paid search campaigns.  He wants to increase his daily profits so he says to himself, “What easier way to increase my profit than to lower my costs on clicks and traffic?”.  So he lowers his bids by 10% and waits in joyful anticipation for his profits to increase.

To Roger’s surprise, he ends up losing money.  WTF?

So why could this happen?

Well Roger, that $1.00 CPC was probably getting you premium ad placement.  When you lower your bid, you run the risk of getting booted off that placement and having your ads show on ones that wont work as well for your campaign.

That’s just one of the many reasons you must track the profitability of each and every placement.  Daunting you say?  C’mon, don’t be lazy.  Your money is on the line here.

Here is one simple truth:  The higher you bid at the start, the better positioning in the ad server rotation you’ll get.  In turn, having your ad shown earlier has a much better affect on conversion rates.

Your target audience might be presented with 5 ads during their browsing session.  If someone is browsing a website for any given time and sees 5 ads about, say weight loss, which ad is that person most likely to engage with if they’re interested in losing weight?  If you’re bidding too low, your ad might be the last to show, which at that point would be just an annoyance to the browser.  Not good.

So you see, bidding low doesn’t always mean increased payouts (or performance).  It’s easy to want to bid low, especially when you’re on a limited budget.  But you have to keep these things in mind.  Higher bids will also typically yield more volume.  More volume gives you more opportunity to convert.

Performance marketing can be quite counter-intuitive.  Spending more on traffic can help you make more profit.  Ugly ad creative and landing pages can yield greater lift in conversion rates.  So test.  Then test again.  Test what you’ve read here.  Your mileage will almost always vary with performance marketing.