I was reading Google’s post  about Enhanced CPC (they're offering a free webinar  about the feature next week) when one sentence in particular struck me as very interesting: “Enhanced CPC is compatible with advanced campaign settings and third party bid management systems.”
For a while now, I have been using a proprietary, in-house bid management  system in conjunction with Google’s Conversion Optimizer  to produce excellent results. I can do this because my company has built our own web analytics data warehouse . Our solution is unique in that we have embraced Google Conversion Optimizer and modified our bid management system to change CPA bids at the ad-group level.
This “best-of-both-worlds” bid management approach is available to anyone using third-party bid management software. While there are certainly many ways to approach bid management, leveraging Google’s data and technology in conjunction with your own tools and understanding of your business can be very powerful. In this article I’ll walk through the benefits of using both your own in-house or third-party bid management software and Google’s new Enhanced CPC.
Google’s bid management solutions, whether Enhanced CPC or Conversion Optimizer, consider a combination of variables that are currently outside of the advertiser’s control as well as some variables that advertisers can control (though many lack the will or resources to leverage the second category effectively). According to Google’s own Ad Innovations announcement  and Inside AdWords  blog, these variables include:
- The user’s geographic location
- Web browser (IE, Firefox, Chrome, etc.)
- Network partners (AOL, Ask, etc.)
- Operating system (Mac vs. Windows)
- Time of day
- Language settings
- Specific words within a keyword
Google uses the advertiser’s Max CPC  as a proxy for the value associated with a keyword, but regardless of your bid, Enhanced CPC will try to improve your likelihood of conversion by changing (up or down) your Max CPC based on an analysis of the variables listed above. For example, searchers using Chrome may be more likely to convert, and right now, as an advertiser, you can’t set a different bid for Chrome users. So using Enhanced CPC or Conversion Optimizer is the only way to affect your bid based on these types of variables.
Third-Party Bid Management’s World
Your third-party bid management system should be using a combination of data provided by AdWords, web analytics data, and revenue and profitability data that Google doesn’t have access to.
- Average position
Web Analytics Data:
- Conversions (with appropriate attribution)
- Keyword classifications
- Cost/revenue targets
By using this more complete dataset, third-party bid management optimizes for profit by setting an appropriate Max CPC bid in AdWords. While this data set is crucial to making ROI-based bid decisions, there is no value in including the variables used by Enhanced CPC, since there is no way for the advertiser to take action (i.e., bid by browser, operation system, etc.).
Two Worlds United
With your third-party bid management focusing on valuing your keywords, and Google’s Enhanced CPC improving your likelihood of conversions for any given Max CPC, you should see improvements that otherwise would have been impossible to achieve (until Google lets us exercise control of all the variables listed above).
But I Don’t Want to Use Google’s Conversion Tracking
Your third-party bid management provider may be warning you of the dangers of giving Google your conversion data because Google learn too much about the value of your keywords.
In my mind, a Max CPC and the competitive nature of the auction can be used as a proxy for value anyway. Either way, Google doesn’t get to understand your business in regards to cost, revenue, and profitability (as long as you don’t tell them how much profit you make per conversion).
If you are not comfortable giving Google information about your conversions, then using Enhanced CPC may not be the best solution for you. For me, however, Google Conversion Optimizer in combination with our own bid management system has been working great for the past several months, and I intend to continue testing this approach.
This is a guest post by Chad Summerhill, author of the blog PPC Prospector.