The Complete Idiot's Guide

Growing Your Business With Google
By Dave Taylor

How much do I need to bid on Google AdWords for keywords?

Q: I logged into my Google AdWords account to explore the possibility of tying my advertisement to a few new keywords, but I can't figure out how to ascertain how much it costs to get to the #1 position for a given keyword. Can you help me out?

I'm a bit puzzled that you have an AdWords account but that you don't know how to ascertain the price of a given keyword, so I'm going to make a wild guess that you're actually just trying to ascertain what value is placed on certain keywords within the pay per click advertising community.

As a result, I want to start by showing you how to use Yahoo's Overture service, because it's pretty easy to use even if you don't have an account. Then, I promise, I'll show you how to work with AdWords too.

Within the Overture universe, you should start by using their Keyword Selector Tool. Type in a keyword or two and it'll show you variants that have the most searches associated, offering you a smart tool to identify what words your customers are using for searches, not your own guesses.

For example, I searched for PSP and got the following results:

Overture keyword search for 'PSP'

You can see that the phrase "PSP" is searched quite a bit more frequently than "Sony PSP" and that there are common search phrases that are a bit of a surprise, like "PSP tube" and "9 psp video". Those are worth learning more about because unusual but popular searches are often the most fruitful keywords to bid on in a pay-per-click campaign.

Now that you have some keywords to explore, Use the Overture View Bids Tool to find out what they're worth to other advertisers. A search for "PSP" reveals surprisingly low bids:

Overture bid value search for 'PSP'

The topmost advertisement is $0.36/click, which is cheap. Why? Because in fact it's not a particularly smart strategy to bid on generic keywords: you want to bid on very specific searches like "buy psp cheap" or "buy psp accessories". The more you can narrow down your ad to only show up when searchers are actually ready to buy your product or service the better results you'll have, hands down.

And so it should be no surprise that the top bid for "buy psp" is $0.54 and "buy sony psp" is $0.83. You can do a tiny bit of market research here too: "buy xbox" is $0.81, "buy nintendo" is $0.32, "buy gameboy" is $0.98 and "buy video games" is $0.45.

So how does Google AdWords offer this same data? Well, it's a bit more convoluted...

First off, you can't get to the Google data unless you have an AdWords account. Once you've signed up, go to the AdWords Sign In and log in to your account.

Now you'll want to go to Campaign Management --> Tools and you can do keyword research with their Keyword Tool. For comparison sake, I'll use their tool to check on "PSP" again. The results are shown in 'more Specific Keywords", "Similar Keywords, Expanded Broad Matches" and "Similar Keywords, Additional Keywords". Here, however, Google doesn't give you any indication of the relative frequency of the searches (which is one reason why a lot of PPC advertisers use WordTracker for keyword research).

To ascertain the bids for advertisements through Google AdWords, you need to use the confusingly named Traffic Estimator. Type in the desired keyword, enter a guess at a reasonable bid, and you're ready to go. I'll use "psp" as the keyword and "$0.25" as the max bid. Here's what I find out:

Google AdWords Bids on Keyword PSP

You can see that our $0.25 bid puts us at an average position of 1.8, meaning that we'll usually be the #2 match, but sometimes be the #1 match shown with the keyword 'psp'. Also notice that, finally, there's some indication of traffic level too: Clicks / Day shows 770, which is based on an (undisclosed) percentage of clicks. If ads for "psp" produce a 5% clickthru rate, that would imply that "psp" is used as a search approximately 15,000 times daily. That's a pretty popular keyword.

Search for "buy psp" using the same $0.25 bid, and you'll find that you've dropped down to an average position of 4.4, showing that, unsurprisingly, that keyword phrase is more valuable. Even moving to a max bid of $1.00 only gets you to the 1.8 position. $1.50? That puts you at position 1.6. $2.00? Position 1.4. Needless to say, that's a valuable keyword, even if it's a less common search term.

And so, finally, it should be clear why most active AdWords users have a variety of different tools at their fingertips to best utilize this popular Google service. If I may, I talk about AdWords at length - and in much more detail - in my book Growing Your Business with Google: you might find it a good investment as you work more with the AdWords system.

Category: Google Q&A   (Article #4377)

About the question:

How much do I need to bid on Google AdWords for keywords. I would like to include a quick answer.

Consider your conversion rate,if of 100 visitors one of them buy something of $50(example), then your cost per visitor is 50/100=$0.2.

The max value that you should bind is $0.2, per visitor. Or you will lost money.

Posted by: Ramiro at April 27, 2007 9:28 PM

I've just received a voucher from google worth £75 and I found your article very helpful. I'm setting my account up now, thanks.

Posted by: Growing Within at January 29, 2010 6:34 AM

This is just fantastic especially the keyword search tool. It helps great. Thank you Dave :)

Posted by: Dan at May 2, 2010 10:06 AM

This is just fantastic especially the keyword search tool. It helps great. Thank you Dave :)

Posted by: jh at October 31, 2010 2:52 PM

I am thinking of running an adword campaign for the keywords, stop smoking, quit smoking, how much should i bid per keyword per click?

Posted by: aaron at April 17, 2011 5:30 PM

Thank you for this helpful information, I've never quite understood how Google's keyword bidding system worked.

Posted by: Anca Muncaciu at November 9, 2011 7:45 AM

I do have a comment, now that you mention it!

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Growing Your Business with Google
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The Table of Contents

Inside The Book
Foreword, by Guy Kawasaki
Introduction to the Book
Increasing Your Business Visibility (chapter 1)
The Benefits of Increasing Your Visibility (Chapter 2)
What Is Google Anyway? (Chapter 3)
Learning about Google Search (Chapter 4)
Disassembling the Google Search Engine (Chapter 5)
What's Your Core Business? (Chapter 6)
Living in an Online World (Chapter 7)
Your Business Website (Chapter 8)
Assessing Your Competitors (Chapter 9)
Keeping Track of Customers (Chapter 10)
The Basics of Building A Good Business Site (Chapter 11)
Developing Online and Offline Content (Chapter 12)
Stretching Your Marketing Dollars (Chapter 13)
Secrets of the Online Marketing Masters (Chapter 14)
Content, Content, Content! (Chapter 15)
Becoming a More Popular Site (Chapter 16)
Becoming an Online Expert (Chapter 17)
Advertising Your Business with Google AdWords (Chapter 18)
Making Money with Google AdSense (Chapter 19)
The Advantages of Affiliate Programs (Chapter 20)
Avoiding Dumb Online Promotional Mistakes (Chapter 21)
Growing and Expanding Your Content (Chapter 22)
The Future of Findability (Chapter 23)

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Google Friends Newsletter, Sept 2008
Bill Gates: The Age of Software-Powered Communications
Google Friends Newsletter - April 2007
Beta announcement of Google AdSense Referrals
Enabling Secure Anywhere Access in a Connected World
Google Friends Newsletter
Google Launches Hosted Communications Services
AdWords now has fraud analysis accessible to advertisers
Google doesn't support click fraud. But isn't that obvious?
Welcome to Google's online payment system, Google Checkout
Google now offers Ad Scheduling for AdWords
AdSense click fraud done by robots?
AdSense: Google's Hidden Payroll
Fun new Google service: Movie info
Google agrees to pay $90 mln in click fraud suit
Latest news from Google: Google Friends Newsletter
Nofollow: Another salvo in the Spam Wars
Google Toolbar Gets Personal
Yahoo Search redesign scheduled?
Note from the Google AdSense Team
What's the future of Pay Per Click (PPC) advertising?
New Google AdWords Keyword System Released

Updates for Readers
Blogging for Search Engine Results
Why does advertising site Chitika audit commission payments?
Google Adsense Update: Section Targeting
Understanding "link:" results (book errata)

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