Thinking about increasing or decreasing your bids, but uneasy about how it might affect your ad performance? It doesn’t quite predict the future, but the Google Bid Simulator will certainly help you understand how different bids could affect your traffic.
So, what is Google Bid Simulator?
The Google Bid Simulator allows the user to explore different scenarios of impressions, clicks and CPCs at a keyword level for different max bids. This is based on the last 7 days of history.
The Google Bid Simulator works by analysing data from ad auctions on Google for each keyword including factors such as Quality score, competitor bids and traffic volumes to provide up to 7 different Max CPC Bid scenarios, as per the graphic below.
To see data from the bid simulator, go to the ‘Keywords’ tab in your AdWords account. Then, click on the bid simulator icon in the Max. CPC column next to the bid of any keyword you would like to see data for.
How you can use this data to maximize Performance?
If we take each of the data points provided by the Google Bid Simulator – Max CPC, Impressions, Clicks and Cost, we can then use conversion rate and AOV data from the same keywords to calculate which Max CPC would have resulted in the highest Gross Profit (or any other performance KPI such as ROI) over that period.
For example if the keyword above had an AOV of £75, a CR of 1% and our Gross profit is calculated at a 50% margin e.g. (Revenue*50%)-Cost, then we would find that a max Bid of £0.17 would give us the optimum Gross Profit. See figure 1 below and the row in grey:
However if the AOV and CR were both double, the optimum max bid would be different, in this case £0.68. See figure 2 below and the row in grey:
Using Bid Simulator data at scale
By pulling the Google Bid Simulator data into our Mercury technology platform via the Google API, we can automate analysis of this data for all keywords where bid simulator data is available. We then set new max bids to ensure we have the optimum max bid/position combination per keyword.
However there are several considerations to take into account:
- The Bid Simulator data that Google provides is only for high traffic keywords. The majority of keywords will have no Bid Simulator data. Bid Simulator also doesn’t work with campaigns that use Advanced ad scheduling or Google conversion Optimizer
- Bid Simulator data is based on historical performance and does not guarantee what will happen in the future. Any weekly changes in conversion rates and AOV will change the optimum max bid/average position combination. However this methodology does ensure that bid changes are reactive to the most recent changes in these performance metrics for high volume keywords
- Click path and conversion lag factors need to be taken into account. If we were to look at sales/conversion rate only on a last click basis, we would be potentially making bid changes based on incomplete data
In Figure 1. the data is based on looking at the last 7 days and so there will be a % of sales that have not yet been reported due to the conversion lag. This will vary depending on the advertiser and the advertiser’s vertical.
If we factor 20% additional sales to this keyword to recognise the conversion lag, then the data would change, with the new optimum bid at a higher level. See Figure 3 below:
Three Take-away Top Tips
Hopefully this has given you some ideas on how to make best use of the Bid Simulation and Google adwords tool. Here are three closing points in summary:
1. Use automation to bid simulate and determine optimum max bids at scale based on your main KPI
2. Integrate conversion path analysis into performance calculations to ensure bid changes are not made based on incomplete data
3. Implement and test on high volume head keywords whilst separately optimising lower volume/tail terms where bid simulation data cannot be utilised
Good luck! If you have any questions please don’t hesitate to get in touch!