Combine Bid Simulator with Value Per Click to Maximize Profits

Posted: October 1, 2009

In 2001 I invented a metric call profit per impression or profit per click based upon the metric value per click (which Google didn’t yet have as AdWords didn’t yet exist).

As far as I can tell, I’m the first one to talk about this metric; however, in the past few years I’ve seen it mentioned a few times – which is great as it means more companies are understanding the revenues associated with their PPC spend.

Google’s chief economist, Hal Varian, took these values (which he probably came up with himself – not from me – he has a tremendous amount of experience in finances) to another level using Google’s new Bid Simulator. The video did make me feel justified in the metrics I’ve been teaching for years, and the long bidding discussion we have at ever Adwords Seminar.

The video is around maximizing profit. However, it does not take into account ROI. Therefore, it’s another bidding method, but might not work for everyone. The video is almost 10 minutes long, and it’s worth watching every second.

If you’d like to see all of Google’s videos; and our favorites. You can subscribe to our YouTube channel.

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Related Information:

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Written by Brad Geddes aka eWhisper · Filed Under Blog, Google AdWords

Comments

3 Responses to “Combine Bid Simulator with Value Per Click to Maximize Profits”

Bradd Libby on October 1st, 2009 8:30 am

Please check out my blog post Optimal Bidding, Part 1: Behind the Scenes of ‘Google AdWords Bidding Tutorial’ for some of the important things Hal glossed over in that presentation.

Also, please see part 2 of that post Behind the Scenes of ‘Google AdWords Bidding Tutorial’, Part 2 for a demonstration of how to determine your optimal bid using Hal’s approach, but not resorting to approximations.

Thank you.
Brad Geddes aka eWhisper on October 1st, 2009 9:18 am

I haven’t heard of your blog before; but those are two good posts – thanks for commenting. I agree with most of what you say. I think ICC adds a degree of unnecessary difficulty to the entire equation. I’m going to follow up this post in the future after I give a presentation at SMX next week on bidding by profit.

I think the comment of yours I liked the best was around some accounts are ROI based and others profit based. I can’t agree more. This method will not work for everyone whatsoever. It’s probably great for lead gen sites that don’t have the hard cost of physical goods. However, many retailers do not want to account for things like paying lighting bills and rent into their total equations, and therefore pad some ROI numbers instead for their overhead costs.
The 6/90 Rule Part 2: Best Uses For The AdWords Keyword Report on October 12th, 2009 6:01 am

[...] then you need to take margins into account before you see your true value per click. If you are a profit based bidder, you will use different formulas for determining your bids; however, the starting data is the exact [...]