A look at Google Enhanced Campaigns' influence on CPC inflation and other factors causing click prices to rise.
The transition to Google Enhanced Campaigns - where you'll be bidding for tablet clicks combined with desktop/laptop clicks - will result in inflationary trends in billed CPCs for many advertisers. However, the advent of Enhanced Campaigns is just one of five reasons you might be paying more for clicks than you could otherwise be paying.
Before I delve into the additional four reasons, let's spend some time on Enhanced Campaigns because this topic is currently on marketers' minds.
Enhanced Campaigns' Influence on CPC Inflation
The strategic decision as to whether or not to accept a blended average conversion rate and/or influence/micro-conversions across the mixed stream of clicks as your basis for bids will often have to do with the elasticity of the marketplace. For example, let's assume that your CMO has asked you to manage campaigns based on conversion rates and ROI with a combination of attribution and last click. Assume you've calculated that tablet clicks are worth 80 percent of desktop/laptop clicks (after having optimized your site for tablets including Flash removal). Also assume that 20 percent of clicks come in from tablets when you are bidding the same cost-per-click (CPC) under Enhanced Campaigns.
So, one would expect that the calculated reserve price on your blended clicks would drop by approximately 4 percent (20 percent of 20 percent). Keep in mind that if that 4 percent bid reduction results in an average positional change, then the loss in volume of clicks may not be worth the tradeoff. If your competition responds by lowering bids as well, one could expect a positional status quo (complicated slightly by differences in Quality Score). In the end you'll have to make your own ROI-to-volume analysis and judge the elasticity of the marketplace for your keywords. My guess is that many advertisers will simply "suck it up" and take a hit on measurable ROI in order to maintain click volume. As you move campaigns over to the Enhanced Campaign structure you'll be able to run tests to determine the best strategy.
However, Google's Enhanced Campaigns and general competitive pressures are not the only CPC inflation causes. In the remainder of this column, I'd like to discuss a few others you may not have thought of.
Geographic mix. While you may have remembered to opt out of surrounding countries or geographies when setting up your campaign, perhaps you've forgotten, or perhaps you've inherited your campaign from someone else. Getting the geographic mix right goes beyond, for example, removing Canada from the default campaign setup for a North American Google campaign. One of the positive outcomes from Enhanced Campaigns in Google (not live yet as of this writing, but announced) is the ability to do negative geographic bid modifiers. My team and I have spent hundreds of hours and filled terabytes of data warehouse space to crunch client data alongside IRS, Census, and third-party data sources on geography and demographics. One can adopt quite a sophisticated positive or negative geographic bidding strategy even if mobile isn't a big deal for you yet.
Don't pay for clicks from the wrong audience and make sure you bid aggressively for your perfect audience.
Google Grants. Ever see a non-profit in the SERP near your ads? Well those ads might be paid for by a Google Grant of in-kind advertising funds. It's great that Google supports non-profits, but those bids escalate your bid prices and potentially even knock you down a position. This is quite an interesting side effect of Google's grant program that may almost pay for the program due to increased bids all the way up the chain in the SERP. Medical and pharmaceutical advertisers are in an industry category more likely to see competitive bidding from a non-profit running a Google Grant.
Session-based broad match. In order to adequately cover all eventualities, even the tightest Google AdWords campaign requires some use of broad match. Unfortunately a byproduct of broad match is session-based broad match clicks. You used to be able to see them listed separately when running a keyword detail report, but a recent test shows session-based clicks simply labeled as "broad match."
Affiliates, competitors, or brand bidders flying under the radar. Just because you can't see an ad in the SERP doesn't mean it's not running. Affiliates, competitors, and channel partners that you have explicitly requested or contractually prohibited from brand bidding often use elements of day-parting and geo-targeting to jump in when you are unlikely to see them bidding.
Some of the above click inflation issues can be mitigated within Google. But don't forget Bing adCenter. The Bing/Yahoo partnership and other syndication partners are big enough that you should start paying attention to campaign performance there as well.
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Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.
Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.
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