Jul 23, 2021
"Why increase your bids if you're already profitable on your campaigns in Google ads?” I get asked this question a number of times. So in this episode, let's talk about Google Ads bid adjustments and how it affects profitability.
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This is a really good question and it makes sense on the top level. However, if we want to dig deeper into this topic, you first need to understand how the Google Ads Auction works. By doing this, you can understand that increasing your bids when you're already profitable can actually lead to way more volume of profits.
Google Ads Auction works by setting a maximum CPC or if you have opted for automated Google Ads bidding strategies, google will set this for you. But everyone has to pay cost per click. It's called pay-per-click marketing. The cost that you're willing to pay isn’t used in relation to your quality score to work out your ad rank and basically, in simple terms, there's a lot to get into here.
It simply means that if you're willing to pay more per click, then you're going to get a high position in the auction and you're going to get a bigger volume of clicks. However, those clicks are going to be more expensive.
How does this relate to profitability?
You have two metrics for this: average profit per conversion and
the actual total volume of profits. There's a bit of a battle
between these two metrics right now. When you're asking this
question because you might be profitable on a product level, this
means that your conversion is making you so much profit. But
because your bids are so low, you're just not getting the volume of
clicks to make a massive volume of profits because you know
theoretically that you can increase your bids in your campaigns.
And yes, your average cost per conversion is going to increase
potentially just a little bit.
When you really think about it, it's quite a complicated question because, as mentioned, you need to understand how the Ad Auction works. Watch this video to learn more!
🎥 Watch the full video version of this episode here: https://www.youtube.com/watch?v=Y79wqeq9ryE
🔗 Here’s the video on Custom Columns in Google Ads that I recommend in this video: https://www.youtube.com/watch?v=-Yt_SKPrhxg&t=0s
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