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Cost per click if theres no other competition left?

[ Edited ]
Follower ✭ ✭ ☆
# 1
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Hi all! I am solving the following question Imagine situation. There are 3 different competitors for AdWords on one particular product in one particular country. They all compete for, lets say, Green panda bear. This county have own demand, lets say, 1000 clicks per 24 hours for Green panda bear. (lets say country is  small with 1000 people living there only, so 1 click = 1 person)

 

For better image lets assume all of the competitors have great Ad rank and all of their keywords are scored 10/10 so they are all perfectly equal. All of them compete - maximize clicks strategy, and all of the visitors clicks on the first result only.

 

  • Competitor one - daily budget is 50€ - max cpc 2€
  • Competitor two - daily bufdget is 100€ - max cpc 1.99€
  • Competitor three - daily budget is 250€ - max cpc 1.98€

 

total click capacity per 24 hours is 1000 clicks.

 

  • Competitor 1 will deplete his budget with 25 (50/2) clicks and he is out of the game for one day. Clicks left 1000-25 = 975 cllicks
  • Competitor 2 will deplete his budget with 50 (100/1.99) clicks and he is out if the game for one day. Clicks left 975-50= 925 clicks
  • Competitor 3 is left alone with budget 250€ and there are 925 clicks left.

 

How much will third competitor pay per one click, if there is no other competiion for Green panda bear for rest of the day? 0.01 cent?

Will his budget cover all the left clicks (demand) ? thank you

 

because If he only pays 0.01 cent per click, situation is as follows:

 

  • Competitor one - daily budget is 50€ - max cpc 2€ - total clicks reach 25
  • Competitor two - daily bufdget is 100€ - max cpc 1.99€ - total clicks reach 50
  • Competitor three - daily budget is 9.25€ - max cpc 1.98€ - total clicks reach 925

 

1 Expert replyverified_user

Cost per click if theres no other competition left?

Rising Star
# 2
Rising Star

Hi Michal,

 

Unfortunately all keywords have a minimum CPC attached to them. While you might find some that are set at a penny, in reality it will usually be much more. 

 

There is no way of seeing what the minimum CPC is, but when you lower your bids on an exact keyword until you get the message saying your bid is insufficient to appear on the first page - that will be pretty close. 

 

 

Cost per click if theres no other competition left?

[ Edited ]
Follower ✭ ✭ ☆
# 3
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Hi Rob and Thank you for reply.

 

if we imagine that minimum cost per "Green panda bear" set by Google will be 0,25 € per click, third competitor will gain much more than two of them that compete with higher bid set per click, is this correct?

 

In my fictional case, his budget will cover 1000 clicks (250/0.25)

 

So third competitor will gain almost all of the daily demand (customers) and save some money too.

 

  • Competitor one - daily budget is 50€ - max cpc 2€ - total clicks reach 25 and 2.5% market share
  • Competitor two - daily bufdget is 100€ - max cpc 1.99€ - total clicks reach 50 and 5% market share
  • Competitor three - daily budget is 231.25€ - max cpc 1.98€ - total clicks reach 925 (savings 18.75€) and 92.5% market share

 

If I summarize this from business perspective of view, Its vital to enter any auction with as much money per day as possible and bid set per click as high as possible but 1 cent less than competitor above to get all the customers in this fictional scenario, because high market share is the most important (If one thinks of AdWords as an investment that pays off)

 

 

Cost per click if theres no other competition left?

Rising Star
# 4
Rising Star

Your assumptions are correct.

 

Keep in mind that Google alerts advertisers when their budgets are insufficient, and if ads are making a profit most advertisers will increase their budget.

 

If it was a case of limited capacity - say your competitors ran out of stock each day - then you could pick up sales from cheaper clicks.

 

And also, often there are times of day where clicks don't turn into sales as easily - typically in the very early morning. Less competition at that time can mean cheaper clicks, but perhaps not clicks that are worth having.

 

 

Cost per click if theres no other competition left?

[ Edited ]
Follower ✭ ✭ ☆
# 5
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I love to simulate all kinds of scenarios and AdWords exported data are very interesting as a subject of my simulations. I will put some data into excel.

 

 

Cost per click if theres no other competition left?

Follower ✭ ✭ ✭
# 6
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Hi Rob,

 

Would you say that in this scenario, the amount you will pay will be based on the amount that you bid? ie if you bid more then you will pay more regardless if there are other competitors or not?

 

Or does Google use a different algorithm to determine it will charge you regardless of the amount you bid?