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Few questions related to lowering the Max CPC

Follower ✭ ☆ ☆
# 1
Follower ✭ ☆ ☆

Hello,

I have few questions related to lowering the Max CPC.
 
Here is how I understand the bidding rank:  Max bid x QS = Ad Rank

Now, if Quality score of my ad is higher than the QS of the ad below me, I can bid less than the ad below me, and still be on the higher rank.
As my Actual CPC is determined by my max CPC, QS and the CPC of the bidder below me, I should be able to lower my Max CPC and maintain the same Actual CPC.
 
In my understanding, lowering the Max CPC should not lower the Actual CPC. (Despite this, Lowering Max CPC is a standard practice for most AdWords professionals).

Yet lately studying my AdWords reports it seems to me that I got reverse affect - lowering the Max CPC seems to be raising CPC. Can someone tell me why is that?
 
Also, lowering Max CPC should not negatively affect our ad rank.
 
Any answer will be appreciated.  Thanks in advance.

 

Imre

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Accepted by Karl (Explorer ✭ ✭ ☆)
September 2015

Re: Few questions related to lowering the Max CPC

Top Contributor
# 2
Top Contributor

Hi Imre,

 

I'm going to attempt to address each point/question here as best as I can.  There are other folks here may be better suited but I'll give it a shot. 

 

Here is how I understand the bidding rank:  Max bid x QS = Ad Rank 

 

I agree with this 100%

 

"The main components of Ad Rank are your bids and the quality of your ads, keywords, and website. If you want to try to boost your position, you'll need to beat your competitors with quality, bid amounts, or a mixture of both."


Now, if Quality score of my ad is higher than the QS of the ad below me, I can bid less than the ad below me, and still be on the higher rank.

 

I would say in theory if your QS is higher, you could bid less than the ad below you, maintain position and you will still pay less than the ad below you.  Bidding less and maintaining position is possible but this can also be tricky.  You don't know how much your competitors are bidding or what their exact QS is and these factors can change for each auction.

 

As my Actual CPC is determined by my max CPC, QS and the CPC of the bidder below me, I should be able to lower my Max CPC and maintain the same Actual CPC.

 

Potentially, but this is making an assumption that your competition is not doing anything with their bids and assuming that quality scores are remaining the same for yourself and competitors...this is no guarantee.

 
In my understanding, lowering the Max CPC should not lower the Actual CPC. (Despite this, Lowering Max CPC is a standard practice for most AdWords professionals).

 

I have in some instances I have been able to lower Max CPC and maintain or lower Actual CPC but I do not believe it is solely due to the change in bids, there are other factors involved, narrowing keyword lists, improving ads and landing pages etc.  But you also have to remember that your bid is part of your ad rank so lowering your bids will automatically lower your ad rank.  Lower ad rank can lead to higher Actual CPC's and lower positioning. 


Yet lately studying my AdWords reports it seems to me that I got reverse affect - lowering the Max CPC seems to be raising CPC. Can someone tell me why is that? 

 

Have your ad positions changed at all?  You may have lowered your Max CPC and allowed one or more of your competitors, potentially with a worse or equal QS to surpass you in ad rank.  They may have raised bids or QS too.


Also, lowering Max CPC should not negatively affect our ad rank.

 

This, if I'm interpreting correctly, is conflicting with your initial statement "Max bid x QS = Ad Rank"

 

Max bid * QS = Ad Rank

$2.00 * 7 = 14

$1.50 * 7 = 10.5

 

Lowering Max CPC does have a direct effect on Ad Rank.

 

There have been some great articles and posts here lately on QS, if you're interested in reading more...run a search in the main search box here on the community.  Here are a couple of direct links too:

 

http://www.en.adwords-community.com/t5/Set-up-and-basics/Ingredients-of-the-Quality-Score-sauce/m-p/...

 

http://www.en.adwords-community.com/t5/Improve-results/The-Truth-About-Quality-Score-amp-Brand-Aware...

 

Hope this helps!

 

-Tom

Tommy Sands, AdWords Top Contributor | Community Profile | Twitter | Philly Marketing Labs
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Re: Ad rank and actual CPC

[ Edited ]
Top Contributor
# 3
Top Contributor

Hello again Imre78;

All Google's videos are normally 2 min. long. Smiley Happy (That has become the standard for a successful video...)

There are a few classic tutorial videos, from early days that are longer.

This video - a classic, 9 min long by Hal Varian - Google in-house economist, is the best I am familiar of, to answer your question: Ad Rank, Max CPC, Actual CPC.. and how they all fit together.

 

-Moshe

 

 

Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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Re: Few questions related to lowering the Max CPC

Zee Community Manager
Community Manager
# 4
Zee Community Manager
Community Manager

Hi Imre, 

 

There is an interesting discussion going on this thread. You can also feel free to ask any question you might have in relation to the Quality Score. 

 

Best,

Zee
G+

Re: Few questions related to lowering the Max CPC

Follower ✭ ☆ ☆
# 5
Follower ✭ ☆ ☆

Hello everyone,

 

First of all thank you for the responses.Here are some thoughts of mine:

 

From reviewing all of the data and the video from the adwords economist, it would appear (at least according to Googles public documents) that lowering Max Bid should have no effect on my CPC provided that I lower it slowly and do not loose my positioning.
Actual CPC = ad rank of person below me divided by my quality score
So I can lower my max CPC in small increments making sure I don't loose my position.
This means that either...
 * what I am seeing is do to the factors such as the position below me's ad rank going down.

Would appreciate follow up throughts on this because again...
 * standard practice has always been to squeeze cpc by lowering max bid in small increments. This is standard for most adword managers
 * Lowering max bid should not have any effect on my CPC although in the past it always seemed it lowered it and now it appears when looking at trends to be raising it.

 

Thoughts?
 ////
I am just curious...

Re: Ad Rank , CPC and MAX CPC

Top Contributor
# 6
Top Contributor

Irme;

I think you got the basics right, and you are the right track. Smiley Wink

However, do keep in mind, that in order to keep your position, other factors are involved: this means keeping close track which keywords trigger your ad, and that your QS does not change. Those are key parameters that Tom  covered widely in his answer, so I will not get into that again.

 

-Moshe

Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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