When I talked about What I Do,I mentioned something in AdWords that really screwed me up for a while. I was referring to the “Optimize Campaign” link.

I thought, “heck, now that I have conversion data, I’ll click this little button, let AdWords manage my bids, and sit back and make some real money!” Boy, was I wrong.

I’ve heard about other people using this and finding Google to hit them in the wallets, too, but I still went through with it. Go ahead, try it… you’ll be sorry you did.

Within one week, Google figured out how to blow past my daily spending limit, and (shamefully) I had a mere 24% ROI. I think the Campaign Optimizer is optimized to use up your budget, so Google makes more money.

Now, I’m back to the old-fashioned way of managing bids: manually. Alright, here’s how I figure out what I’m bidding per keyword:

First, you need to know how much you want to spend per conversion. For the program I’m promoting, I’m willing to spend $7.75 per conversion. Next, in AdWords, get to your Ad Group and click on the Keywords tab. You should see your list of keywords, max bid, conversion rate, etc.

Select a date range with some history, and sort by Conversion Rate. To figure out your max CPC per keyword, multiply your target ($7.75) by the conversion rate. For example, one keyword I have is converting at 19.05%. So $7.75 * .1905 = 1.48. My max CPC on that keyword is 1.48.

What this means is that if 5 people click on my ad for this keyword, I’ll spend at most $7.40, and with a 19% conversion rate (about 1 in 5), I’ll have 1 conversion, which cost me $7.40, just under my target of $7.75.

Make sure you have a good foundation of data before doing this… if you see a 100% conversion rate, based on 1 click, I do not suggest setting your max CPC at $7.75.

Is this a lot of work if you have a lot of keywords? Yes. But money doesn’t come easy, or else everyone would be rich.

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