Using Enhanced CPC and Third-Party Bid Management


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 World

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.

AdWords Data:

  • Impressions
  • Clicks
  • Cost
  • Average position

Web Analytics Data:

  • Conversions (with appropriate attribution)
  • Keyword classifications
  • Etc.

Revenue Data:

  • Profit
  • Cost/revenue targets
  • LTV
  • Etc.

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.

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Craig Danuloff
Sep 01, 2010

Thanks Chad for the overview. I'll be honest and say this (putting Google in charge of bidding) scares me to death.

They have the data and the capacity to do a fantastic job. What bothers me is a) they won't share the same data so we could do it ourselves and b) they won't report on what they do (at the per click level) so there is no real way to audit beyond the very broadest level. I'm sure they can, at least sometimes, improve results. There is also no doubt they create waste along the way. This is fraught with problems not the least of which is they're getting smarter as time passes and the advertiser is not (while therefore becoming more dependent).

They should commit to sharing all the data advertisers need to make decisions and see what's happened in the auction as a first priority. Advertisers would be far better serviced if they did that AND offer their own tools as options.

Advertisers need to keep the pressure on Google for more openness and not just more tools/features.

Michael W.
Feb 09, 2011

Gotta side with Craig here. In my opinion, using both 3rd-party software AND Google's Enhanced CPC creates too many factors operating on the same variable (Max CPC) - much in the same way having crazy ad scheduling in AdWords and a bunch of 3rd-party bid rules in place can cause havoc.

Chad Summerhill
Sep 01, 2010

Craig, thanks for stopping by. Just in case you don’t know Craig, he is the founder of ClickEquaions, a PPC Marketing Platform (third-party bid-management, etc.). He shares his insights and knowledge over at the ClickEquations blog—I recommend you subscribe today! Craig, I would never suggest that advertisers put “Google in charge of bidding”. In my article, I clearly point out that advertisers should control their bidding up to the point where they have no more control. Turning on Enhanced CPC or Conversion Optimizer is in no way a substitute for true bid-management. I recommend using it to boost an already solid advertiser-side bid-management program. As an advertiser, it is our responsibility to control what we can control, or, rather, control what Google allows us to control. I agree with Craig and would love for Google to give us click-level visibility (after all we pay-per-click, it seems fair to get click-level data) and more control over the variables that I mention in the article that Enhanced CPC has access to. The reality is that most advertisers are not sophisticated enough to take advantage of the control that already have (me included). However, there are big competitive advantages for companies like ClickEquations with this increased visibility and control. They would be allowed to compete with Google to take control over the variables that Enhanced CPC uses. And we should assume that a third-party software company’s interest should align more closely to the advertiser’s interest. At the same time most third-party software vendors charge advertisers a % of PPC ad spend which doesn’t make sense to me. The software vendors will make less money if they reduce your overall spend, and this does not seem like a big motivator to reduce overall spend to me (which might be in the advertiser's best interest). As an advertiser, I would prefer a fixed and predictable cost for software. Consider the big differences in CPC between verticals—for the same amount of work by the software it may cost one advertiser triple the price just because their vertical’s CPCs are higher. Software vendors use this pricing model because they can, and Google very slowly releases more control because they can. We have limited choices which give Google and the software vendors more leverage over the advertiser. This is totally fair by the way. We don’t have to use Google and we don’t have to buy third-party software. It’s up to them to prove their value to us so we will participate. Advertisers should absolutely put more pressure on Google to give us more control and visibility just as we should pressure the third-party software community to align their pricing models with the advertiser’s interests (pay for work, not % of my spend).

Craig Danuloff
Sep 28, 2010

Chad - Sorry for the delay, just saw your reply.

I didn't mean to suggest with my 'put google in charge of bidding' comment that you were suggesting blind trust - I realize you're making a very defined and subtle argument. I was simply setting up a platform for the A/B points that followed. More practically speaking, if Google can/will jump in and 'help' with bidding that certainly could be good. That does seem to be what they intend with the Enhanced Bidding and their specific effort to make it compatible with 3rd party solutions. (but I still wish they'd release more data before/after the bid).

Your point about tools pricing on spend is fair - it's a somewhat unfortunate and admittedly imperfect proxy for both scale and value. We've been looking for a good alternative for years - but with an industry 'used to' one way of pricing, being the non-standard option requires a lot of swimming up-stream. Actually very few clients/prospects even ask about alternatives.

I see the pricing issue much more clearly for/at agencies (in terms of having an interest and ability to increase (or not decrease) spend. Tools enable you to cut spend or find savings pretty easily. In any case, I probably agree that at some point things will change.

Thanks again for a great post.

Ben Culbert
Dec 18, 2013

Nice article. I've been investigating using enhanced CPC as an alternative to using geo and time of day bid modifiers at the campaign level. In addition to giving us access to levers we can't control (OS, browser, etc.) it theoretically addresses seasonality factors associated with geo and time of day modifiers. I think that all too often, geo and time of day modifiers are analyzed once and then baked into a campaign for too long, even though something may have changed. Anyway, it will interesting to test this on top of our bid platform to see what the impact is. Thanks for the great post Chad!

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