May 2009

Do you ever wonder … ?

… if I increase my Max CPC bid from $2 to

$3, how many more clicks can I expect to
get?

… what would be the new position of my

ad if I bid $3 instead?

… how much would the clicks costs?

… how can I bid more effectively?

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Bid Simulator: What are the advantages?

Adds transparency into Google’s auction process and enables

informed bidding decisions
Estimates the click, cost, impression, and average position data that your
ads would have received in the last seven days had you set different
keyword Max CPC bids. Enables you to compare the performance of
different bids and select the one that works best for you.

Simplifies bidding process

Reduces the amount of time spent doing trial and error experimenting with
various keyword Max CPC bids.

Enables calculation of incremental cost per click (ICC)

Enables you to take incremental cost per click into account by
communicating click cost information at different bid levels. More on what
ICC is and why it matters later.

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Bid Simulator | Can you use this?

• Are currently using

– Conversion optimizer
You can not use bid
– Budget optimizer
simulator if you:
– Position preference
– Ads scheduling (advanced or basic)
• Have campaigns that hit your budget

Note: If you are an Enhanced CPC beta participant, you will see the bid simulator
option but should not use it. If you use any of the above, bid simulator will not show up.

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 Bid Simulator | How does it work?

Your quality score

Your competitors’ bids and their quality scores

We know Amount of traffic search network received last week

Probability of a click on your ad given its position

Google’s auction system

Which position your ad would have shown at for any bid

We The number of clicks you would have gotten at those

estimate positions

The cost of those clicks

Note: This is a simulation of last week's data. Next week's results could be very different due to
changes in search traffic or actions by other advertisers
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Bid Simulator | Keyword thresholds
In order to get simulations, your keywords must meet adequate traffic
thresholds

Keyword (in the last seven days) Feature simulates

Receives adequate traffic • Click, cost, impression, and average

position data

Receives lower traffic • Click and cost data

Receives hardly any traffic • No simulation data

. . or keyword was recently added

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Bid Simulator | Accessing the tool (step 1)
Accessible from the AdWords front-end. Sign into your
account, and you are ready to begin

Select as many keywords as you

want to see simulations for and
click on “Edit Keyword Settings”
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Bid Simulator | Accessing the tool (step 2)

• Click “bid simulator” under any keyword’s search bid

• You cannot choose keywords in bulk but must click the
bid simulator link individually for each keyword

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 Bid Simulator | UI – Scenario 1
Scenario 1:
Your keyword receives adequate traffic: shows the estimates of clicks,
cost, impressions and average position for several bids

Approximate
hypothetical bid range:
Max (2 x current bid)
Min (0.5 x current bid)

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Bid Simulator | UI – Scenario 1 (close-up)
Scenario 1:
Your keyword receives adequate traffic: shows the estimates of clicks,
cost, impressions and average position for several bids

Date range of simulation

Current bid
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 Bid Simulator | UI – Scenario 2
Scenario 2:
Your keyword receives lower traffic: shows the estimates of impressions
and average position

Date range of
simulation
Current bid

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Bid Simulator | UI – Scenario 3

There are no estimates for a keyword that does not meet any threshold.
either because the keyword was recently added or the bid is too low to
receive any impressions

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 Bid Simulator | Practical example
… I’m the marketing manager at PowderSki.com and need to bid
more effectively in order to get promoted this year! What should I do?

Well . . . . I recall seeing an AdWords blog that described a

free feature that will give me the insight to make better bidding
decisions.

So, let's see what I can do here . . . Our most important

keywords (i.e. the ones that spend the most) get more than 30
clicks a week, so I should be able to see bids vs. click cost
data for them.

Let's look at [skis].

At our current bid of $1.00 we got 69 clicks for $32.20. What if I went up to a bid of $1.25. That would
mean 119 clicks for $68.10. Hmm is it worth it?

We make a profit of $50 per conversion and our conversion rate is 10%.

By increasing my bid to $1.25, I would be spending $35.90 more for 50 more clicks. I expect those 50
clicks to turn into 5 conversions (at our 10% conversion rate). And I expect those 5 conversions to bring
in $250 (since our average profit per conversion is $50).

Wow! Spending $35.90 to get $250 seems like a good deal. I should increase my bid to get those
profitable clicks.
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Bid Simulator | Things to note

When a new keyword is added or a campaign started, simulations are

generated once there is enough click or impression data

Bid simulator does not simulate conversions or predict future results

Data gets refreshed once a day

Simulations are for Google.com and search only

Bid changes do not hinder our ability to simulate

For broad match keywords, the # of impressions (and, therefore, clicks) can
change dramatically with each bid. Even for a KW with avg position 1.1,
increasing a bid could make a significant difference in volume
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 Bid Simulator | Popular FAQs
• Bid simulator and the Traffic Estimator use different data
• The Traffic Estimator looks primarily at overall traffic patterns
How is bid simulator
different from Traffic • Bid simulator's results are specific to your campaign and keywords
Estimator? • Bid simulator is more accurate at predicting results for a particular
advertiser

• AW3.0
• AdWords Editor
Bid simulator is not • API
available on …
• .CSV downloads
• Bulk changes

How does it work for a

• This is not available for content. If a campaign has both search and
campaign opted into the
content, bid simulator will only show simulations for search
search and content
networks?

How does this compare to • This is not meant to replace 3rd party services for bid or campaign
3rd party bid management management, as they provide many services beyond bid estimates
tools • This feature should help 3rd party bid management companies to be
more effective in helping their customers

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Bid Simulator | Planned future features

Additional features • Simulation at ad group and campaign levels

• AdWords 3.0
• API
Compatibility with • Editor
• Conversion Optimizer
• Ads scheduling
• Budget-constrained advertisers

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Bidding Concept | Incremental cost per click (ICC)

Bid simulator enables you to calculate your incremental cost per

click. It’s important to understand this concept to utilize the feature
fully

ICC measures how much extra you need to pay for the extra clicks
when moving from a lower bid to a higher bid

Bid Clicks Cost CPC Change in cost Change in clicks ICC

3 31,200 $3,770 $0.12 $3,770 - $3,360 31,200 - 30,700 $410 / 500

= $410 = 500 = $0.82

2 30,700 $3,360 $0.11 $3,360 - $2,810 30,700 - 28,000 $550 / 2,700

= $550 = 2,700 = $0.20

1 28,000 $2,810 $0.10 --- --- ---

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 Bidding Concept | How to use ICC
Keyword 1
Bid Clicks Cost CPC Change in cost Change in clicks ICC
3 31,200 $3,770 $0.12 $3,770 - $3,360 31,200 - 30,700 $410 / 500
= $410 = 500 = $0.82
2 30,700 $3,360 $0.11 $3,360 - $2,810 30,700 - 28,000 $550 / 2,700
= $550 = 2,700 = $0.20
Current bid 1 28,000 $2,810 $0.10 – – –

Keyword 2
Bid Clicks Cost CPC Change in cost Change in clicks ICC
C 21,545 $2,760 $0.13 $2,760 - $2,360 21,545 - 20,115 $400 / 1,430
= $400 = 1,430 = $0.28
B 20,115 $2,360 $0.12 $2,360 - $1,810 20,115 - 18,000 $550 / 2,115 =
= $550 = 2,115 $0.26
Current bid A 18,000 $1,810 $0.10 – – –

Scenarios: Which bid should I raise?

• I have extra $600 approximately – raise keyword 1's bid from 1 to 2 because
the ICC is lower than from A to B

• I have additional extra $1,000 (beyond the extra $600) approximately – raise
keyword 2's bid from A to C. Don't raise keyword 1's bid because the ICC is
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higher
Contacts and Resources

Contacts • AdWords help email

• FAQs:
Resources
http://adwords.google.com/support/bin/topic.py?topic=19567

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