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Does a keyword with No-Competition have the lowest CPC ? Day#3

[ Edited ]
Top Contributor
# 1
Top Contributor

Day 3: AdWords Insight # 3 –

 

Does a keyword with No-Competition have the lowest CPC?

 

Yet another question that I come across very often. It usually comes from new advertisers trying to understand the nuts and bolts of AdWords. 

 

The most common statement they have is - "We're in a niche industry and we've no competitors, we are the first advertiser for this kind of keywords. So, our CPC should be minimum, considering that AdWords is an auction based platform and when we have no competitor, we should ideally be paying the least for a click, say - $.01."

 

And they play a winning smile... 

 

How do you tackle this? Smiley Happy

 

My explanation is something like this - 

 

About 10 years ago in August 2005, Google introduced the quality based bidding model. According to this model, it's the quality score that plays lead role in deciding CPC of a keyword, not the competition. 

 

Google says -  "The minimum CPC for a keyword is not related to the number of competitors one has that keyword. Instead, minimum CPC is dependent on the Quality Score of the keyword, as it's used in the advertiser's account."

 

Hence, it's the quality score that decides the minimum CPC or say the starting CPC for a keyword. This is the reason when you add keywords to your account, you get an estimated CPC. Google decides this amount by analysing your account and by referring to the accounts of other advertisers for the same exact-match keyword advertising on Google.com.

 

But this is not all. There's more to it. 

 

Beside considering the QS of the keyword in question, Google also evaluates the performance of this keyword across accounts of other advertisers. What does this 'performance' mean?

 

I will explain this further.

 

It can mean several things, some of which can be the answers to the questions like - 

 

How has this keyword (exact match) been performing or has performed in the past for other advertisers? What was the average CTR for them? How has it been performing in terms of conversions? How productive this keyword has been in the past? 

 

This is when Google analyses both QS and the performance metrics for the keywords and decides the final minimum CPC. 

 

To make it even easier to understand, it can be assumed that there's a minimum threshold for ad rank of a keyword and also (read may be) for bids. We as advertisers need to go equal to or past this threshold to start seeing our ads on Google. As long as our overall ad rank is below this threshold, the ads will not trigger. And as said above, this threshold is decided by quality score and the performance metrics. 

 

So, when using Keyword Planner if you spot a keyword with ‘high’ competition and lower CPC, but a ‘Low’ competition keyword with comparatively higher CPC, do not be surprised. Based on the quality and performance approach used, competition does not co-relate to minimum CPC.

 

However, there are ways (that'swhy you are hiring me) to keep the actual CPC you will be to the minimum, but obviously not below this threshold.

 

This is how I convince my clients. I would love to know how do you do it?

 

I mean how do you convince your new clients asking such questions? I am excited about your views, do share them. Smiley Happy

 

Thanks
Ratan Jha

 


About Me: Community Profile | Ratan Jha INC.
If this or any other post solved your question, do not hesitate to accept it as the solution.
3 Expert replyverified_user

Re: Does a keyword with No-Competition have the lowest CPC ? Day#3

Explorer ✭ ☆ ☆
# 2
Explorer ✭ ☆ ☆

Hello Ratan,

 

Being honest with the client, I will just tell the real story of minimum bid threshold (some people call it "Floor Bid") instead of giving a long boring thesis to him about Adwords concepts.

Even if no one is bidding on a keyword, one needs to keep a significant amount of bid to be on the first page.

But how much- it always depends.

 

Rohit

Re: Does a keyword with No-Competition have the lowest CPC ? Day#3

[ Edited ]
Top Contributor
# 3
Top Contributor

Hi Rohit,

 

Thanks for sharing your views. 

 

Being honest and true to clients always pays off in long term, there's no question about it.  Thumbs up to you for the same. But to me, it should not and is not a boring thesis to a customer's who is going to invest money and stake into it. If they ask, they deserve to know the reason behind. But yes, there's no point explaining whole story without being asked. Even the crux as you said would do. 

 

Thanks

Ratan Jha


About Me: Community Profile | Ratan Jha INC.
If this or any other post solved your question, do not hesitate to accept it as the solution.

Re: Does a keyword with No-Competition have the lowest CPC ? Day#3

Top Contributor
# 4
Top Contributor

It should be noted that Google hasn't disclosed whether it's a minimum  threshold of QS for the  ad to be shown, or a minimum ad-rank or a combination of both.  My guess - it's  a combination of both.

Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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Re: Does a keyword with No-Competition have the lowest CPC ? Day#3

Top Contributor
# 5
Top Contributor

@MosheTLV 

 

Yes, I agree. I also guess the same. That is why I used the words like assumed, may be  on that note. There's no official disclosure on minimum for threshold.  All it talks is quality based approach, but it's enough to validate why minimum CPC cannot be $.01.

 

Thanks
Ratan Jha


About Me: Community Profile | Ratan Jha INC.
If this or any other post solved your question, do not hesitate to accept it as the solution.

Re: Does a keyword with No-Competition have the lowest CPC ? Day#3

Follower ✭ ☆ ☆
# 6
Follower ✭ ☆ ☆
Another good article! I will bookmark this. I still deal with people who think Internet advertising should be free Smiley Happy

Re: Does a keyword with No-Competition have the lowest CPC ? Day#3

Visitor ✭ ✭ ✭
# 7
Visitor ✭ ✭ ✭
LOL thanks.

Re: Does a keyword with No-Competition have the lowest CPC ? Day#3

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# 8
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