This post was originally posted on December 29, 2015 by Roy Steves on LinkedIn. In this post we'll take a look at how COS (Cost of Sale) or ROAS (Return on Ad Spend) AdWords bidding models can capitalize on opportunities that are sometimes counterintuitive.
Benefits of Sticking to COS or ROAS Based AdWords Bidding Models
You might think that something as systematic as Google AdWords would be a game played only with data. Sure, there are other humans bidding against you, but their actions and strategies are entirely hidden behind the veil of Google's search auctions.
Or are they?
Assuming your catalog hasn't changed (in prices or selection), then there are really only two variables that produce the noise and variability you see in your account--shopper behavior, and competitor behavior.
While it may therefore be difficult to tell one from the other, the resulting trends can be analyzed in this context, and you can start to draw inferences about what's banging around in your competitors' heads.
One of the easiest forms of competitor behavior to track is what you can infer from Impression Share over time. If your bids haven't changed, and your Average CPC is dropping, then you might think that competition has softened on those searches--and if you see an increase in Impression Share over the same period, that supports that interpretation. After all, if it were a change in shopper behavior, it's likely to manifest itself as a change in volume, and so this metric gives you an excellent relative position versus your competitors, regardless of that underlying volume.
The Christmas holiday gives us a great opportunity to see this kind of thing in very stark contrast. Several of StatBid's clients show a pattern like this for December's daily clicks:
Obviously, there was some shopping momentum coming off of Black Friday and Cyber Monday at the beginning of the month, as promotions ran long, but would you have expected that doubling of clicks starting the day after Christmas?
Usually, clicks doubling overnight suggests a red flag--you don't want to double the associated costs, unless you're also getting revenue. But these accounts were making money--the Cost of Sale barely moved, so the quality of the traffic was similar to before, but there was just more of it. Where did it come from?
Let's add Impression Share to that same chart, and see what it tells us:
Essentially, the Impression Share started climbing on Christmas Eve, and has been higher, proportional to the increase in Clicks. If you switch to CPC on this chart, it's fairly flat--we weren't paying more per click to get that traffic, our existing bid had just become more competitive. Don't get me wrong--December was very strong up until this point already, as StatBid is getting smarter and smarter every day, so this bump was an unexpected bonus.
How? Well, all signs here suggest that the competitors on these Accounts had turned their bids way down after the end of the "holiday shopping season", and didn't turn them back on--and they may not till after New Years! Ignoring this "conventional wisdom" is resulting in real financial gains for Accounts taking a more data-driven strategic position.
Google AdWords operates on an auction basis, so it pays to keep a close eye on your competitors, and sometimes, do exactly the opposite
The exact inverse of this Christmas pattern, although less drastic in charts, can be seen in many Q4-heavy retail sites--they'll start to turn up bids going into the most competitive part of the year. The idea being that you need to "get in there" and duke it out with everyone else.
While this might be a good strategy if you're a larger player in the space, and you want to make waves (been there, it's fun), if you're the scrappy newcomer, a more financially efficient strategy might be better (been there, too--even more fun). Target your intended ROI or COS using an AdWords bidding formula, and stick to it, through thick and thin. Sometimes, that might mean letting your competitors cut each others' throats on busy days, but other times (like December 26th) it might mean having free reign of the market while the big dogs lie around exhausted from their previous battles.
And if you're successful, you'll get bigger and bigger, till you can realistically do both--take advantage of weak points in your competitors' calendars, while bringing the battle to them on their home turf, too.
image credit: link (flickr)
Basically, those heavy-hitting bidding wars are companies that have decided that the market impact of that advertising investment is worth something beyond just the revenue--to force competitors into situations they'd prefer to avoid (over-stock, over-spend, etc.) so that competition isn't as strong in the future. However, if you're the small dog, that's an expensive proposition, and you're much better off sticking with a strong offense, and investing purely for the return--this will give you something to reinvest in those future battles, after all.
What this all boils down to is the fact that the auction format results in a very stark supply-and-demand click economy, as the only reason a given click is worth a given amount is because someone is willing to pay that for it--and that's more than the next person. If you can keep that in mind, it makes you mighty. If you'd like to talk about how StatBid's COS-based AdWords bidding or ROAS-based AdWords bidding works feel free to reach out to me.
Drop me a line via the Contact form--I love to talk shop.