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Lesson 5a: Cost Control
How AdWords Controls Costs

Objective: Learn how AdWords helps keep your costs down with the AdWords Discounter and smart pricing.

AdWords Discounter and Actual CPC/CPM

With Google AdWords, you set a cost-per-click (CPC) bid or cost-per-1000-impressions (CPM) bid. However, the AdWords Discounter works so you usually end up paying less than this amount.

Here's how it works: After we determine your ad rank, the AdWords Discounter calculates your actual CPC or CPM. This is the actual amount you pay to maintain your ad's position above the next lower ad. Your actual CPC or CPM is never more than the maximum CPC or CPM bid you specify.

Smart Pricing

Google Network bids may be different from Google web search bids. Using smart pricing, AdWords may automatically lower the maximum cost-per-click (CPC) bid for keyword-targeted ads that appear on Google Network pages. While you set one maximum CPC bid, if our data shows that a click from a Google Network page is less likely to turn into actionable business results - such as online sales, registrations, phone calls, or newsletter signups - we may reduce the bid for that site.

For example, let's say that you advertise digital cameras. Your ad appears on two different pages - a Google web search page for the keyword 'digital cameras' and a Google Network page. If Google determines that your ads are not likely to perform as well on the Google Network page as on Google web search, AdWords may reduce the maximum CPC bid for that site.

Smart pricing reductions are automatically reflected in the Avg. CPC column on your Campaign Summary page.

 
 
How You Can Control Costs

Objective: Learn how you can control your AdWords advertising costs — primarily through your daily budget and bids. Understand the advanced pricing option of content bids.

Setting the Right Budget

The daily budget is the primary way to control your overall costs. It determines the most you're willing to spend per day per campaign. Since you set a daily budget for each campaign in your account, you can add up all of your daily budgets to get an idea of how much you could spend per day for your entire account.

The daily budget determines how often your ads show throughout the day. You can set your daily budget to be as high or as little as you want. You set your daily budget via your Edit Campaign Settings page:

  1. Sign in to your account at https://adwords.google.com.
  2. Check the campaign you want to edit.
  3. Click Edit Settings.
  4. Set a daily budget under the Budget Options section.
When choosing a daily budget, keep the following in mind:
  • Your daily budget must always exceed your CPC or CPM bid. If it doesn't, your ad won't show.

  • You can view the recommended daily budget — based on the keywords or sites you choose, bid amount, and other factors — by clicking the View Recommended Budget link below the Budget field.

  • If the recommended daily budget is more than you can afford, optimize your keywords, ads, or targeting options. To learn more, visit the Preparing to Optimize lesson.

  • You can choose between two ad delivery methods when setting a daily budget:
    (1) Standard (default setting): Your ad appears intermittently throughout the day if we find that your ad receives more charges than your daily budget allows. This means that your ad will be shown less frequently but spread out evenly throughout the course of the day — rather than shown only in the morning.

    (2) Accelerated: Your ad appears as often as possible until your budget is reached. If your budget is low, this means that your ads may stop showing early on in the day, as soon as your budget has been exhausted.
  • We may "overdeliver" your ad up to 20% more than your specified daily budget on a given day to provide your ad extra exposure on heavy-traffic days and to make up for days when traffic is low. If we exceed your monthly budget (daily budget X 30 days), we'll issue overdelivery credits to your bill. See the Billing lesson for more details.

Setting the Right Bids

Your maximum CPC or CPM bid represents the highest amount that you're willing to pay per click or thousand impressions, respectively, on your ad. You can set a bid at the ad group level, or for individual keywords and placements. (See the Ad Group Details page lesson for more information.) If you don't specify a maximum CPC or CPM bid for a given keyword or placement, the ad group maximum CPC or CPM bid will automatically apply.

When setting your CPC or CPM bid, consider the following:

  • Your Quality Score. This is the single most important factor we use in determining the price you pay per click for keyword-targeted ads. Therefore, you can decrease the overall costs of your ads by increasing your Quality Score. To learn more, visit Preparing to Optimize lesson.

  • The value of a click. How much is it worth for someone to visit your website? How likely is it that a click will turn into a conversion (sale, signup, etc.)? If high, then you might want to set a high bid. If low, lower the bid. You can get conversion statistics by setting up conversion tracking or by using Google Analytics.

  • Your daily budget. Be sure that your daily budget is higher than your CPC or CPM bid. Otherwise, your ad won't show.

Content Bids

You can set separate content bids for clicks on the content network, just like your search bids for for clicks on the search network. It's especially useful if you find that you get a higher return on clicks from one network than the other.

For example, if you find that clicks on search pages return more sales than you get with clicks on content pages, you might want to lower your content bids.

Content bids are automatically enabled for all campaigns opted in to the content network. You can change your content bids at the ad group level. Here's how:

  1. Sign in to your AdWords account at https://adwords.google.com.
  2. Click the campaign you'd like to edit.
  3. Check the boxes for ad groups with content bids you'd like to change.
  4. Click Edit bids.
  5. Make your changes in the column labeled Content.
  6. Click Save changes.

If you leave the content bid field blank, your bid will be set to 'Auto' by default. Auto content bids are based on an average of all keyword cost-per-click CPCs for the ad group (including the default ad group CPC and individual keyword CPCs). You can change this automatic bid at any time to a price appropriate for your advertising needs.

Continue to monitor your campaign performance, and make adjustments as needed. To learn more about assessing performance, visit the Quality and Performance Basics lesson.