When you start with a portrait and search for a pure form, a clear volume, through successive eliminations, you arrive inevitably at the egg. Likewise, starting with the egg and following the same process in reverse, one finishes with the portrait. –  Pablo Picasso

Since we launched our PPC Associates blog, we’ve brought to our readership a plethora of very sophisticated posts…focused on either strategy or point of view. We haven’t really published any really basic content yet…so let me correct that oversight right now.

When we take over an existing account for a new client, we use the old data as the basis for rebuilding the account following our Alpha Beta account strategy. After the new account structure is created, one of the things we have to figure out is what the initial bids should be for the keywords in the new campaign.

Frequently, I’m faced with a massive spreadsheet of information containing lines of data like the following:

So, what should the new bid be when I relaunch this keyword in a new campaign? (For this example, I’m going to assume $1.50 CPA target.)

First, I’m going to state right off that what I’ve pulled from AdWords is the “Search Query Report” (the actual keywords used by the searcher) and not the “Keyword Report” (showing the keywords to which the searcher queries were matched). If you don’t know what I’m talking about, stop reading this post at once and learn everything you can about Search Queries and AdWords.

The average CPC for this particular term is $.55. However, $.55 isn’t the current bid for the term.  Through experience, I’ve surmised that the likely bid average for such a term is roughly 20% above CPC, or $.66 in this case (an estimated number but a pretty good one IMO).

The average historical CPA for this term is $2.92 – which is almost twice as much as the target, meaning we’ll need to reduce the bid. But what formula should I use to calculate what the starting bid should be?

($.55 [Avg. CPC] * 1.2) * (1.5 [CPA Target] /2.92 [Historical CPA]) = $.34 Starting Bid.

Many factors change when we launch a new campaign, so this new starting bid may or may not achieve the new CPA. It could be wildly off target. Bid adjustments might be needed to be made very quickly depending on circumstances. However, once the campaign accumulates enough data under our management, the wild swings indicative of an account takeover should subside substantially.

Also, realize that the above calculation reflects what I’d bid for the Exact Match (Alpha) term. We would also launch the term in Modified Broad Match (Beta). I typically start the Modified Broad Match bid at 65% of Exact Match.

Happy strategizing!

Todd Mintz, Senior SEM Manager

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Todd Mintz
Todd Mintz, who has been with 3Q Digital since March 2011, has worked in search engine marketing since 2000 and has used Google AdWords since it began. He also is very visible in the SEM social media space and is a curator/contributor at MarketingLand. He was one of the founding members of SEMpdx (Portland’s Search Engine Marketing Group), is a current board member, and writes regularly on their blog.