Google AdWords Bidding Tutorial

[anavel754]

anavel754

[ssoddssodd]

Precaution. Google Adwords is a scam!

They steal money from the Israeli public and the Muslim community. Then they say that advertising is not going to their terms

[idannymac]

I may be wrong but should your cost be clicks*avg cpc?

so here 697.42*3.35= 696.8

Is there some kind of rounding?

[InnaGrey]

where does cost (third column) came from?

[Rodrigovgo]

Why Bill Gates are working for Google?

[HellaFlushEvo]

@Rodrigovgo LMAO that's what i thought

[Rodrigovgo]

@HellaFlushEvo :)

[ElloSkrilla]

When in doubt just go to Google! I almost thought Google didn't have a channel...now that I see there is I don't have to keep asking other Bull-Shittaz, THANKS Google Biz

[catherinetk68]

Hal certainly speaks like an economist: In the first 2 minutes he shows the 'price' - 'cost' to equal 'revenue' - nice, but wrong. 'Price' is revenue, 'cost' is of course 'cost of goods sold' leaving 'Gross Profit' before ALL of the other expenses to where the 'Profit' figure really exists. So let's say after all those other 'costs' your 'Net Profit' (or loss!) is probably around $20 - $30 NOT $100. So, let's go back and see the next 7 minutes of the video Hal so we can figure the REAL returns!

[bitesizzle]

@catherinetk68 yah i hate upside down talk...  it made it difficult to follow him closely.

[NESPResso85]

Sorry if I sound daft, but I do not understand why if the Bid is 5 and the clicks are 208 the cost will be 697! isn t it supposed to be more?????? don t we have to multiply the bid for the clicks to have the cost? thanks in advance!

[supreme18jaloos]

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[DavidKlein65]

Yeah, 4Firearms, you are right. Google sold over $20 billion of paid search last year because it doesn't work. People just gave their money to Google because Varian is so sexy. Idiot.

[4Firearms]

Listening to Google's Chief Economist is like sheep listening to a wolf.

His main job is to get GOOGLE the most amount of money. PERIOD.

Google is the one making the money here, no the Adwords user.

[DSMeTailer]

@4Firearms This is very clearly solid advice.  Follow along with a calculator and tell me, specifically, what someone should do differently.

[pietam6]

this is a very big help to a 'newbie'. It starts to make sense, but will need to see it again for reference. Thank you, pietam6

[MrDarrylHudson]

Ok i'm getting there

[cul9ilbert]

Very clear explanation.thank you

[OakBluff55]

Great video! Thanks for explaing how to analyzie this as a business.

[wcsconcierge]

Wow, it's such a great concrete example of how the numbers work, very educational. Studying for my Adwords certification and this video brings alot of clarity to how to "run the numbers".

[ssduya2009]

not comng mani ok

[jobiegler]

thank you for your Video Mr. Vanian its a really simple explanation;) it shows that i have to do a lot of calculations before i know how much i bid the best.

[sonupv]

Mr. Varian, good video. You say at 1:21 that one can pay upto max profitable CPA for each conversion and still make a profit. Did you mean to say "breakeven" instead of "profit". If my max profitable CPA were $100 and I paid exactly $100, I would break even and not make a profit, right ?

[anhduc1912]

@sonupv CPA is the max profitable of one particular product so you should adjust your CPC depend on your daily income. And never, yes never let google automatic calculate your CPC.

[pandarcakes]

is there an animation version of this video? like the other adwords tutorials?

[MsDinkyJo]

this is sooo helpful, thank you Hal! great job!

[uzbekguy1]

mouse moved 1:46

[cisaz1]

Could he sound anymore excite about this stuff?

[norathenomad]

Excellent info, thanks Dr. Varian!

[saltyprime]

hey

[MikeMexicali]

How many clicks generate no revenue?

[mlmsuccessnet]

A little dry however, It was very informative.

[defnyung]

Since when did Bill Gates join google? Waiting for bluescreen of death...waiting...waiting...

[GodsItalianStallion]

Gee, I sure hope Google can find a way to make these videos more boring for us.

[louismccall]

@GodsItalianStallion I don't think the people who would watch this and actually expect to refine their biding structure were in search of an entertaining speaker. Looking for entertainment in lue of the point is how we got our current President.

[PalmyBruce]

Very useful and helpful - thank you very much. Bruce Thomson in New Zealand.

[bustasalta]

Mr. Hal Varian: Let me tell you that google adwords is advertising in my videos and I don`t earn a dolar. Yes i Speak and write English, I know what con is. In Cstellano (Google doesn`t know that Castellano is the language of Spanish spaeking people, maybe Google says Canadians speak Canadian) En Castellano se llama ESTAFA.

[superdave31]

like the high rated comment said - why pay google 600 dollars to then only make 300! (unless of course without google you only make 100)

[CraneumVending]

Bill Gates's brother???

[uzmate]

dont't take his words at face value...his calculations are just outrageous and a bit misleading, make your own calculations which is best serves you not google

[unknown1974]

would anybody tell me where the hell he got the $697.42 figure?

tks

[yumeshimanet]

@unknown1974 It was a case simulation: as the bid is actually the maximum you could pay for it, you could actually pay far less than 5$ * 208 clicks (1040$ of maximum expense).

[cedw1]

@unknown1974 It does not have to be explained, it is a result that comes out from the system. The reason is that an advertiser does not pay what he is bidding (here, 5$); instead he pays what the second-best bidder is bidding. Not knowing what the second best bidder is bidding, one actually does not know one's costs. The only thing he can be sure of is that it won't be higher than what one's bidding.

[bcodutti]

HAL you are great thanks for this video!

[chunificationify]

i like learning about this but this guy is borring me

[keithkashflow]

nui;874155

bvn

[conejitometal]

pretty much sucks! :(

[kamenovi]

in case you bid 3 dollars, you profit 335 $, and google gets 230$.

In case you bid 5 dollars, you profit only 7 $ more, an google gets 3x230$, nearly 700 $ ....

Just think about this!

[endlessepic]

This guy has such a soothing voice. I feel asleep at my desk listening to this :D Hey at least I was subconciously learning about my job and it was only a 1 minute nap. Good info though.

[sunofegypt]

Great way to explain such a process, but i would like to understand why is it that complex? Why doesn't Google figure out an easy way for us to do this? The majority of people advertising at Google do not get into this much details. They just want their Ad's delivered at a price within their budget ranges. They do not need rocket scientists to do this process for each product they have! Suppose i have an eshop with hundreds of products. I won't be able to repeat this process for everything!

[MrEspozita]

Did the Chief Economist of Google really just say that $4.50 + $4.80 = $10.30?!?!?!?

Google's making it so fast they forget how to count...

[PhLisaME]

@MrEspozita it's not calculated this way. look at the values of each click at the $5 bid - they do not correspond to A,B,C in the $4.50 bid.

So to get $10.30 he subtracted the totals ($21.60-$10.30) and then divided by 2.

so the Maths holds.

[mditoma]

Great work. If you need any advice please feel free to visit our website on :

iprimisugoogle(dot)altervista(­dot)org

[thatexactly]

great video

[thatexactly]

This video has some great tips, check out my blog for more tips on Adwords and feel free to comment.

[beneeB]

in this example Google is making over 20% of the sale. Pretty nice margins for Google for doing Nothing

[cabbagedavidge]

Only question, on the graph where you show bid $5 - Clicks 208 - Cost $697.42 etc How did you arrive at the figure of $697.42?

Thanks for any help with this.

[steddes]

@cabbagedavidge - about the figures. You have a max bid on $5 but that is not your actual cost. Your avg. cpc is 3.35 which is the amount you times with numbers of clicks. Which gives you the exact cost

[mbw82ag]

@cabbagedavidge I am a CPA ad like yourself am hung up on HOW or where he got the $697.42...did he just pull it out of thin air??? Why does he imply you make a profit or "at least break even" at $5 per Click; he assumes no cost other than the Google Ad Budget! I understand diminishing returns, hence a 4 bid maximizes the profit but I think the columns could be more clearly labeled and the simple math shown better.

[cabbagedavidge]

Your presentation was a great way to help understand. Thanks for such clear easy to follow explanation. I have grappled with trying to understand Adwords bidding, you have now made it so much easier.

[NewGameReleases]

4 dollars for one visitor? lol i'd pay like a penny haha

[MrLakiwi]

Because you're a broke ass fool

[FreethinkR08]

Paying up to $100 for each conversion would lead to a break even scenario. He says at this point you can still make a profit on the sale. I highly doubt this guy works at Google, they wouldn't hire someone this incompetent.

[josephclawrence]

I read your other comment, and you clearly understand the video less and less the more you watch it. None of the statements are contradictory. You rarely pay the full maximum CPC bid for a click, which is why when you bid $5 you would at worst break even, but probably turn a profit. This is not contradictory to saying that if you paid your full CPC max bid of $5 you would be breaking even.

[FreethinkR08]

There is a reason why that comment was deleted. Why don't you address how you're making a profit if you are paying $100 per conversion at a sale price of $300, and your wholesale cost is $200. Address that.

[FreethinkR08]

Revenue is $300, not $100.

[josephclawrence]

This is just a semantic question - Hal is calling revenue the money you generate from the sale before you factor in the cost to you for the advertising

[lalkidar]

if the CPA is 100 $ how did you make profit on that sale ? in the first simple example ?

[deepwatermadshark]

I don't see where the "cost" value comes from if you haven't actually done it at the CPC value. Does this mean that before applying this you have to run the auction at each value level?

[andyux]

Im a PC!

[miguel1233TX]

google bunch of robbers

[gianka9574]

consigli molto importanti da ascoltare con attenzione e mettere in pratica... e poi si ottengono grandi risultati......

[x2xHalox2x]

Wow, so in this example google makes more than the guy selling it!

[AdvertiseLocally]

@x2xHalox2x No, this is considering your wholesale COST not advertising cost AND if your ads are converting you can pump it out BIG TIME!

[PronouncedBOOYAH]

@x2xHalox2x Yes, Google gets there cut but justifiably so-it's there search engine the client is advertising on. The guy selling it, if not trust worthy-takes the client money and you , the client are not on Google. It happens all too often. Sad.

[dayver1]

The theory about ICC is fine if IF on every position you will have the same conversion rate.

Common place 1 / 2 in Google will get most traffic, but it wont get the highest conversion rate. I am managing Google PPC account (spend $300K a month on google) and I am telling you guys, In 80% of niches position 1 and 2 will have lower / higher conversion rate when position 5 and 6. So you have to make that adjustment as well when calculating your Max Profit per Conversion, ICC etc.

[auspirevideos]

Applying this tutorial to your own Adwords campaigns can be very revealing. Many Adwords users are unaware they are spending more per click than their conversions can afford.

[jbigga]

HOW DO I JUST PAY FOR CONVERSIONS?

[OwnzTer]

Hey Hal.... can i have 50% of googles proffits? please...!

[ajcolman]

What! if you make $1000 profit, you have to give nearly $700 of it to google??? Do you think we are silly!!

[miguel1233TX]

that is true

[joe1977poland]

if you buy a camera for $200 and sell it for $300, you're a scumbag!!

[mike30111983]

If you are lowering your maximum cpc to get less clicks you will get a lower ctr and therefore your add will have a worse performance score and after a little while rank even lower still then originally predicted. Surely the Adwords Bid Simulator doesn't take this in to consideration?

Also vice versa if you higher your maximum cpc.

[kdbarber]

Less numbers / more graphs please.

[buddhiw16]

Great.

[BusinessPlanWriter]

Great site

[zastil]

lol google make more than twice as much profit than you do! ripp off

[scottedwards2000]

I really enjoy and appreciate your videos - your calm, clear, and careful approach is very refreshing and helpful. This and the video on explaining the auction logic are priceless! I am most impressed however by your pointing out that bidding at your CPA is NOT always the way to maximize profit - so often the advice I've seem from the other engines is to bid "what a click is worth to you", which of course maximizes THEIR profit. As usual, Google takes the long-term, sane approach of win-win!

[marvel1980]

The manual process il almost impossible on thousands of kws. There is a way to get the estimations through API?

[GeorgeRBM1999]

We're banging this same drum. If we can get the data dynamically it's tough to use it comprehensively.

I also worry about Schroedinger's Cat. If we all look at the same landscape (which is only updated once a day) and react to it, don't we end up changing the landscape?

[TimothyCohn]

Thanks for the overview Hal.

I agree with George about Lifetime Value.

However, if Hal's presentation is beyond the grasp of most Adwords advertisers - which it surely is - lifetime value has to be as well.

[GeorgeRBM1999]

Nice job, Hal.

This is where we are. The issue is not every firm is looking to maximize profits, and based on lifetime value considerations, some are willing to lose money on the initial order. This means there is no one correct formula for success. Nevertheless, you lay out the math beautifully!

-- Your friends at RKG

[nielsww]

If you calculate the average lifetime value of a customer, you can still use the same method as described in this video. Right?

[GeorgeRBM1999]

Absolutely, you can fold it into the click valuation, but that needs to be done carefully. First, are you considering the lifetime value only for new customers created or for every buying instance. Some keywords may be more likely than others to generate new customers versus repeat customers.

But you're right, whether you fold it into the efficiency target (losing money) or into the click valuation, you reach the same bid.