5 Reasons To NEVER Use AdWords Automatic Bidding

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Many things that seem too good to be true actually are. Candy corn flavored Oreo’s, Pop Rocks martinis, and classifying pizza as a serving of vegetables are a few such things that could make the long list. One more to add to that list would be AdWords Automatic Bidding.

why to never use automatic bidding

I recently shared some tips for switching from automatic bidding to manual bidding. In this post, I’ll explain why you might want to do that. Some smaller advertisers with severely limited time might find comfort and see moderate results in the “set-it-and-forget-it” characteristics of Automatic Bidding. However, if you’re looking to optimize beyond the basics, there are five specific things to consider before choosing between Automatic vs. Manual Bidding:

#1: Impression Share

Just because you’re bidding on a particular keyword doesn’t mean you’re showing up every time it’s searched. In fact, it’s possible that your ads for keywords in your accounts could be shown less than 10% of the time!

The most common reason for lost Impression Share is low Ad Rank. While Quality Score plays a significant role in ad rank, the quickest way to improve your rank is often increasing your bid. With automatic bidding, you can’t selectively choose to increase the bids on terms that are core to your product or service. Thus you can’t influence or increase Impression Share on those terms, you will continue to lose impressions for your ads, and potential conversions will pass you by.

#2: Page Position

Search can grow your business from the ground up exponentially faster than many traditional channels, yet first people have to see your ad. If it’s buried in a low position on the SERP, searchers might be skimming over it in favor of other links on the page. Think about the last time you searched for a product. Did you even bother to glance beyond the top 3-4 positions?

To ensure you are truly receiving impressions for critical keywords in your account, you would want to bid higher on those specific keywords so that your ad places in the top of page or at least position 4-5, to reach those searchers who might be the most actionable to convert. With Automatic Bidding, you again can’t selectively choose to adjust the individual bids on those critical keywords, which leave your ads at the bottom of the page.

#3: Tiered / Stacked Bidding

Tiered or Stacked Bidding, a more advanced bidding strategy, pertains to the specific match types you’re using in PPC. More specific match types can drive higher CTR’s, increase Quality Score, and even prove cheaper than clicks on more general match types. Those same specific match types and terms can often drive conversions at a higher rate and lower cost than more general variations.

Since those keywords are more valuable and a higher priority, they are bid higher than Broad Matched variations. As you get more specific with your Match Type, you bid 10-15% higher for each: Broad < Modified Broad < Phrase < Exact. Your Exact Match keyword should have the highest bid since it is the most specific, while the other match types are tiered lower than the next more specific type.

While an advertiser would prefer to receive all clicks on the most specific match type to reap the benefit of higher CTR’s and lower cost, Google tends to be more concerned with your Max CPC (when bidding manually). If you had a higher Max CPC on a Broad Matched keyword, that term is likely to pull in Exact Matches as well, even if you have a specific Exact Match keyword in the account (Impression Share also plays a role in why this occurs). To prevent this from occurring, you would typically use this Bid Stacking strategy. However, with automatic bidding, since you can’t edit your bids, you can’t tier your match types, which leaves it up to Google to decide where to attribute your clicks.

#4: Exorbitant Bids

adwords automatic bidding

To be honest, this isn’t as much of an unavoidable concern as it is a great insight into how Google will manage your account when you hand over this control. Expensive bids can certainly be avoided with a realistic maximum CPC setting, however one keyword without one can serve as a great example as to why you should avoid giving away control over your bidding.

The keyword below is long-tail, a fairly selective Modified Broad match type, and uses Automatic Bidding. It’s from a competitive industry, but average CPC’s range from $10-$50. It received one click. That click cost $362.63. (Click the image to enlarge.)

never use automatic bidding

Again, this can be avoided by setting a lower maximum CPC bid limit, yet it seems to highlight the extremes that can occur with Automatic Bidding. Even in industries like Insurance or Law, clicks rarely go that high. While the Maximum CPC was set high to achieve a high Impression Share, most of the clicks remained around a $10 -$30 Average CPC as expected. More control over your individual bids would guarantee that such a circumstance wouldn’t occur. Google lacks your intuition and discretion for wasting spend, so don’t solely rely on their judgment to determine the value of your keywords.

#5: Manual Management of CPA

If you’re taking the initiative to read this post or educate yourself in PPC, it’s most likely you prefer to be in control of your account. For most in search, the goal of this control and education is to lower your CPA, or the cost incurred to get each conversion. Automatic Bidding can stand in stark opposition to that goal.

Consider keywords in your account that might convert at a higher rate than others. Ideally you would want to receive more impressions and invest more on the keywords that convert. That “attention” would be reflected in a higher bid price for converting keywords and a lower bid for lower converting (but still relevant) keywords. With Automatic Bidding, Google makes the decisions on how the budget and bids are prescribed for all keywords. This prevents you from making more specific preferences for your converting terms as well as lackluster keywords that just might be driving cost rather than value.

Is It Really NEVER, Ever OK to Use Automatic Bidding?

For these reasons of control and management, most advertisers prefer to use Manual Bidding as their AdWords bidding strategy. When creating a new campaign or reworking a severely underperforming one, I would recommend the same. The single exception that I would offer is if you’re a smaller advertiser whose account is currently working satisfactorily with this setting (CPA is where you’d like it), don’t feel you arbitrarily have to change it! Consider yourself fortunate, and avoid rocking the boat with Google with such a change.

Need to make the transition from Automatic to Manual Bidding? Try following the best practices outlined here.

Do you use Automatic Bidding in your own account? Are you suffering from some of the issues highlighted above? Let us know in the comments, and I might be able to shed some light on a solution!

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Comments

Sergey
Nov 11, 2014

Great post!In my case it works very well if you need a lot of cheap clicks and you don't have kpi. Don't forget about CPC bid limit and everything will be fine :) 

CJ
Oct 15, 2015

What about ENHANCED bidding - should I be using that? Can't find anything online about enhanced bidding strategy, except some info from Google. Strange.

Input very much appreciated!

Regards
Jörgen

David Rothwell
Nov 12, 2014

Don't agree.Caleb, you mention nothing whatever about value per conversion and Return On Ad Spend.Although I concede most advertisers don't know what that is or how to measure it (they aren't my clients).If you're profitable with positive ROAS go after more impression share and higher postions until you achievethe perfect campaign (position 1.0, 100% impression share, accelerated delivery, unlimited budget (thoseare my clients).If you're not profitable you have to give away both of those and look at how to fix that, with transaction-specificconversion tracking and offline import in a 90 day time window.Automated bidding (but only with sufficient conversion volume) can help you drastically in the right situations.You should always be looking for *more* automation opportunites, not less (don't forget automated rules).And Google runs a unique ad auction over 45,000 times a second (internetlivestats.com)Are you trying to tell me there's any other way *but* AdWords automation to optimise bids and ad deliverywith that amount of auctions running? 

Caleb Hutchings
Nov 12, 2014

Hi David, Great response! You're correct, many of the advertisers I've worked with haven't been so skilled to consider ROAS, yet many aren't ecommerce as well.  That attribution is quite difficult for lead based conversions so this is authored to be broad enough for both audiences. Hence the initial focus on CPA. In the same vein, many of those advertisers might not be knowledgeable or know how to effectively excecute Bidding Rules in Adwords.  While some Rules could certainly enhance performance, I'm wary of advertisers "setting and forgetting" others to the detriment of their account. To your point, Google certainly does sit on plenty of data to make informed automated decisions. However, the application of this knowledge isn't as efficient as we would wish in many accounts. For example, some of the dozens of accounts that inspired this subject suffered from the same symptoms of Broad low converting but high volume keywords soaking up most of the budget while specific keywords with a higher conversion rate struggled to gain impression share. Even Conversion Optimizer has fallen short on these accounts.  To refocus our limited budget specifically on those terms we had to take more control over what Google's Automation would provide.  Many non-ecommerce and some ecommerce alike struggle from that situation. It's not an anti-automation stance as much as it is a roadmap to fix issues caused by a lack of control.Best,Caleb

Tom
Nov 13, 2014

"With automatic bidding, you can’t selectively choose to increase the bids on terms that are core to your product or service."You can - just set labels on such keywords. Then your scripts can identify these high-priority keywords and set the bid strategy accordingly.

Lukas Krejca
Nov 13, 2014

Don't be so sharp. Automatic bidding is a good servant but a bad master - but it is the same for every automatic function.  But it could help - for example: every day check of  1st page bidding is my favourite, with max. CPC limit it is very good tool to be sure you are on the 1st page..   

Islam
Nov 27, 2014

Dear, Excuse my ginorance, how can I read the av. position Ex. 4.3 what 4 refers to and what 3 refers to ??

Maverick
Dec 11, 2014

Based on sample your ad average ranking position is 4.3Let say - First time when ad was shown on 8 positionsThen it was shown to 4 positionsthen 632and then 5 So what would the average position:  8 +4+6+3+2+5 /628/6  = 4.66Hope you got the concept behind average ranking

llarsa
Dec 01, 2014

Thats outrageous!! How can they do that? I suppose you cant get reimbursed either? Great article!!

Don Hesh
Jun 16, 2015

I don't really agree with Page Position Page position argument. This post might be old. However they have option to bid for top of the page.

Eddie
Jun 30, 2015

I've just started with google adword adverts for my company.
To start of, I have a really minuscule budget for google ad. (Also partially to test out the effectiveness)
I started of with $15 budget and I notice I only get 5 miserable clicks for what I spend.
(Obviously I started out with auto bidding of course)
I notice the cost is ave $3+ per click.
My question is if I adjust to manual bidding of $0.50, will I get more clicks?

Bear in mind that, I have checked the keywords that I keyed in and there isn't many people in my country using google to advertise and I have also set to the state in which I live in.

I felt that there shouldn't be much competition for those key words in my country.
(Is this how google adword works?)

Eddie
Malaysia

Archit
Jul 10, 2015

Hi Eddie,

Switching to manual bidding from automatic may alter your adrank if you adjust your manual bid lower than the bid suggested by the google. Hence, your ad position may fall down and then you may required more number of impressions to make users to click to your ad. Though your Click through rate may be reduced but you will get more clicks for the same amount of budget as you decided to pay a maximum $0.50 for a click. But you must need to maintain a good quality score.

And if there is none of your competitor still due to low adrank your ad may be shown at the side position instead of top( where you are eligible to show ad extensions along with the ads) without any other ad on the SERP.

Paul
Jul 10, 2015

I know this is an old post, but what are your thoughts on how this pertains to the new Call-only campaigns? Is auto-cpc a good idea then because every click is a lead essentially. As long as you're not showing up for irrelevant terms then getting the most clicks in this case should be your goal.

Rose
Aug 04, 2015

I am confused... as far as I can tell, you can specify which keywords you want to automate and you can also select a maximum bid for those. I just spoke with AdWords help and they have been no help, so would appreciate the input. Thanks!

Curtis Noble
Aug 28, 2015

I'm a bit confused as to why I'm getting much much lower cpc's when I use automatic bidding with NO maximum CPC? For example, I used to manage my bids manually and would set a max CPC bid to $1.00. But then I would get the warning that none of my ads are showing because my bid is below the first page minimum. So I'd raise to $1.50 and get some impressions, only to get that warning within 24 hours again. So I'd raise to $2.00. Same thing, a few impressions, then the warning that my bid is below the first page minimum. This kept going until I got fed up at $3.50! So I selected automatic bid management because I couldn't keep up with the daily maintenance. Guess what happened? ALL of my ads began showing and the CPC column indicated Auto (.35). My average CPC went down to $1.00 in 24 hours. Then in another 24 hours it dropped to $0.50. Another 24 hours the entire account average CPC was down to $0.35! So I'm getting way more clicks. But my CTR's dropped significantly. My average position by ad group varies between 2.7 and 4.3. So, my question is, why are my ads showing with AdWords Automatic Bidding when the bid is 35 cents per click but if I put 50 cents per click as a manual bid they won't show because it's below the first page minimum. Obviously it's not below the first page minimum because that's what I'm paying per click for positions 2-6. Any thoughts?

Gregory Moore
Jun 25, 2016

Why cares why? You're getting good results. Since experiments in this area tend to show all the results they are going to show in about three days, just keep experimenting - not with setting bids, but with configuring the various automatic options.

I'm surprised your CTR went down. Usually mine goes up.

gssoftware
Jan 16, 2016

Very informative

Jhonny Boy
Apr 13, 2016

Adwords is nothing but a scam. You'd come off better throwing your money into a fireplace. Only companies with big budgets can effectively use adwords because they can make what they bid back in a day. To a small company like most people that use it, it's about the only way to get attention for your little business or website otherwise you're stuck in the bottom with all the other websites in your genre looking to get on the google first page. Google has changed a lot over the years and it went from a place where a website with good content could rank to a website that pushing out big money to be on top can rank. I've never had success using adwords other than seeing my bank account dwindle it's a rich game not a poor mans game. Unfortunately there's not much else you can do to get your website promoted without badgering people to mention your store on a website or blog and hoping you kiss enough booty to get backlinks to rank. Again something that bigger companies have much more resources to accomplish. So what is google really in all this? It's a way to commercialize the internet.

bhargav
May 30, 2016

Great Article,
Thanks!

If we want more Brand Awareness, we are defiantly going for automatic bidding.

Gregory Moore
Jun 25, 2016

As an Oracle DBA I learned there is no such thing as a feature that is evil and should never be used.

Personally I've had great luck with AdWords automatic bidding. You just have to configure the options correctly and invoke them.

You can't figure this out from books because even the best authors provide incorrect "best practices" guides.

You have to experiment for yourself. The good thing is, the effects of your experiments will show completely within a few days.

Just keep trying....

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