Choosing the right bid for a keyword can be very tricky.
Some will advise you to place a bid with the best ROI and some will say to place a bid that will generate the highest CTR.

What is the right answer? You will judge. Some of the parameters involves with this formula are not formally published. Part of the information is speculations and assumptions made by those who investigate this issue (or not).

An ROI oriented affiliate usually place a bid based on the EPC (earnings per hundred clicks). For example if for a product A the EPC is 0.6 cent and you would like to get a 100% margin, most likely you will place a bid of 0.3 cent.

A CTR oriented affiliate will bid so the ad will be placed higher as possible. It’s well known that the “warm” area within the PPC ads is the first 1-3 ads. Those ads get the user attention more than the ads below them. More potential clicks = more sells.

What most people don’t know is that the top 3 ads not necessarily have the highest bid. Google is trying to get the best for both sides – a classic win win situation.
I will demonstrate it using a simple case study:
Suppose an ad (A) with $1 bid has a CTR of 2%. A different ad (B) with $0.5 has a CTR or 15%.

$1 * 2% = 0.02
$0.5 * 15% = 0.075

Google is very impassioned about their income. Which ads do you think they will give a priority?

Affiliates many times described that as the time go by they pay less and less for a click. The reason is simple. If your CTR is getting better your ad will be seen higher and you will pay less.

At the bottom line both CTR and ROI are important. Those terms cannot be compared. Those who are taking care for the CTR from day one get their profit in the long run. They loose money for few weeks or even months in order to save money in the future. Those who care about the ROI from day one, most likely will not find their ads at the top 3 and therefore their income will be less than those who improve their CTR on a daily basis. It’s the key point to get the maximum traffic from a PPC campaign.

You need to try both scenarios on each of your campaigns in order to determine what the best method to use. Try to estimate what is the lowest bid that you might get with a high CTR. I will talk about this issue in detail in another time.

If you like this post then please consider subscribing to my full feed RSS.