What’s the Deal with Min Bid Prices on Google Anyway?
July 1st, 2007 by 
Amit
There’s a lot of commotion about what determines your Google minimum bid prices, your ad position, and how building a site compliant with the landing page “quality” score will actually benefit you.
I myself was REALLY confused about this for a long time. I had a chance to discuss this with Perry Marshall, and clarify what’s was what, and what causes what.
Here’s some common misconceptions about minimum bid prices on keywords and the landing page quality score:
- Google increased bid prices on keywords that are converting in order make more money off of you
- If Google likes your landing page, it will discount your cost per click by 30% and send you the same amount of traffic, cutting your expenses by almost a 1/3
- If Google likes your landing page, it will send you WAY more traffic
- Google targets affiliates, since they want to push them out and play the affiliate game themselves
- etc etc…
1 & 4 are total BS, 2 & 3 have some truth to them, albeit with a misunderstanding about what Google does if it likes your landing page.
First off, your ad position is NOT determined by landing page quality, but ONLY by CTR times your bid price. Your landing page quality score ONLY effects your minimum bids and nothing else.
So if you want to get cheaper clicks on Google there’s two things you need to do:
- Improve your Google Ad CTR by split testing two ads at a time. Here’s a great post by Derek Beau on exactly how to do that. If you can double your CTR, you’ll pay 1/2 the cost per click for the same ad position.
- Get the lowest minimum bids as possible, because if your minimum bid is $5, nothing else matters until you get that down. Below I talk about exactly how Google determines the minimum bid of your keywords. You want to get this right FIRST before you even worry about what your CTR is.
So here we go, there are 3 and (so far) ONLY 3 factors that effect your minimum bids:
- Google Ad Relevancy - How targeted your Google Ads are to the keywords in your adgroups. The best way to assure you maximize this is to have tightly targeted adgroups with the keyword in the ad at least once. Domain name also plays a factor here, so if you can register a domain name like: www-blue-widgets, if you’re selling blue widgets then that will improve your ad relevancy
- Landing Page Quality - I’ve talked about this one in depth, your landing page needs to be part of a real site, and have targeted content’s relevant to the keywords in your adgroup. Refer to this post, for more details.
- Bounce Rate - This may be a real surprised to many of you. Google actually looks at how long visitors are on your site. If too many visitors are hitting the back button right away, Google will slap you with higher min bids. This is why it really pays to have compelling unique content on your site. If your affiliate site looks exactly like everyone elses, what do you think the visitor will do?
I usually don’t do a lot of posts about nitty gritty details like this, however, you REALLY need to know this stuff if you want to succeed at the ppc game.
Adwords can really be overwhelming for a newbie, there’s a lot to it, but the dividends of understanding all the excruciating details are what separate the wannabes from the true blue super affiliates.
The first step of success is knowing all the rules, and mastering the basics.
Posted in Google™ AdWords | 
Fantastic post Amit. This goes for any site that uses AdWords PPC, not just affiliate sites.
There are so many wacky theories that Google is trying to squeeze every penny from advertisers it’s not funny anymore.
Good information here. I wasn’t sure if Google factored your landing score into your placement. I also didn’t know that they were tracking bounce rates.
Wow, that’s a great and easy to understand explanation on getting good min bid price on AdWords.
At least
Thanks for sharing this Amit.
Great tip Amit and thanks for sharing that.
Didn’t even realize that you linked to my article until I checked my stats tonight. Thanks!
Hi Amit,
It is because of your advice and transparency that has saved us so many pitfalls.
Vijay
But how does google measure bounce rate? If I click on an ad and then click the back button immediately, the google page isn’t refreshed, and no new requests are made to google.
So how would they track something like that, presuming that the site in question isn’t using analytics?
Amit,
What software and/or script do you use to track your keyword conversions-to-sales so that you can remove the keywords that are unprofitable?
Hi Kristian,
Great question, I think they track the time between when someone clicks & enters your page and hits the back button and clicks on another search result.
Hi Jeff,
I use Google Conversion Tracking.
Amit,
You said:
“First off, your ad position is NOT determined by landing page quality, but ONLY by CTR times your bid price. Your landing page quality score ONLY effects your minimum bids and nothing else.”
Does this mean that if you’re minimum bid is .20, and you were planning on bidding .45 anyway, that the minimum bid of .20 is somewhat irrelevant?
Also, in the calculation, is this accurate:
2.5% (CTR) X .45 (bid) = 1.125 placement position
Can you elaborate in another post a bit further on this calculation?
Thanks for another great post!
Peter
Hi Peter,
The CTR X Bid prices does that give you the exact position you’ll be in, but just the position relative to other advertisers.
Yes if you bid 0.45 then the 0.20 min bid is irrelevant. But keep in mind that your bid price can never fall below 0.20, no matter how high your CTR is.
Amit, how does CTR factor into QS and vice versa? I often noticed that good CTR will eventually lower my min bids, while often times terms that don’t get too many clicks will gradually go up. Is this completely a coincidence, or is this in some way factored in?
Oh and thanks for the info, I was told by many people that QS actually affects positioning and if I would by able to get a better QS my bids would drop, all the while I was paying around a buck for a competitive keyword with an OK QS ..
Enjoy reading your blog, keep it up, and I’m looking forward to meeting you in Miami.