• by Jeff Licciardi , May 24, 2010

Savvy search marketers understand the importance of focusing on the right keywords in any search-based advertising campaign and adjusting maximum cost-per-click (CPC) accordingly. Marketers constantly look for ways to increase visibility into keyword performance in order to guarantee strong ROI and also find room to grow impressions. In this constant quest to improve campaign performance, marketers have a major opportunity in Google's new bid simulator, a feature of the AdWords interface that shows marketers the potential impact of their bids on their advertising results. Google's chief economist, Hal Varian, compares the bid simulator to a spreadsheet where marketers can test different scenarios to illustrate the real value between click and cost; extracting data from the auction and presenting it in a way that's easy to understand.

While the bid simulator can't predict the future, it enables marketers to explore what could have happened if they had set different keyword-level bids. Using data from the previous seven days, the bid simulator re-calculates three key metrics: the number of impressions for which marketers' ads could have appeared had they chosen a different maximum CPC, how many clicks the ads could have gotten for those impressions and what those clicks would have cost. The feature offers advertisers increased visibility into the AdWords auction and the insights to make more informed bidding decisions. This simulation data helps marketers determine the trade-off between click volume and cost, enabling them to more confidently determine how to increase site traffic without raising costs too much and for which keywords they should alter their spend. While it wouldn't be practical to factor bid simulator info into every bid decision made in AdWords, it is added information worth reviewing for high traffic keywords.

Performics worked with Google to discover how bid simulator could help optimize clients' search campaigns. Using the bid simulator for a major retailer, Performics looked at bid simulations for tens of thousands of keywords. Account managers then mapped the bid simulator data to conversion information across the entire program and, based on this information, manipulated CPC bids on a smaller subset of keywords. Anywhere the campaign experienced strong ROI and room to grow impressions, account managers increased the bids in line with the bid simulator's analysis. Performics began concentrating on how many impressions were garnered and monitored the actual revenue the keyword generated. Essentially, the team calculated revenue per click and acted on that information to add clicks when appropriate.

Once bid simulator findings were incorporated into the active keyword portfolio, the retailer saw day-over-day increases in impressions by as much as 11 percent. Since those impressions came from the right keywords -- where the client had already demonstrated strong ROI - daily revenue increases registered as high as 20 percent. The net results created day-over-day increases in ROI of up to 17 percent. Owing to the substantial increase in performance, the client shifted budget from less efficient keywords in the examined group of 400 to more efficient keywords identified by the bid simulator.

In the constant struggle to balance efficiency and volume in paid search programs, the Google bid simulator helps marketers gain insight into this paradigm. The bid simulator offers crucial analysis when establishing budgets and measuring incremental volume possibilities. This information provides marketers a better sense of how much added volume can be gained from any given term; data that marketers can use to make more informed and effective bid management decisions.