How much should I bid on AdWords?

A reader wonders:

I’m really confused about the whole bidding game.  My fear is that I bid too much and wind up with a $4,000 google bill.  How do I gauge how much to bid?  And how can I have a rough estimate of how much it will cost for the month?  I was doing the starter edition where I set my monthly budget at $250, but ever since I moved onto the standard edition and starting bidding on my campaigns, I haven’t had a single order.  I don’t know what I’m doing wrong. 

My response:

First, your bidding probably doesn’t have much to do with the lack of sales.

If you’ve stopped getting visitors, then you may be bidding too low to appear on the first page of search results.

If you’re getting visitors who aren’t buying, then one of two things (or both) is true:

1. You’re attracting the wrong people

2. You’re showing them the wrong message

But let’s leave that alone and return to the bidding issue…

How to Not Wind Up with a $4000 Google Bill

1. Set your campaign budgets low.

If you have 5 campaigns, and you set the budget for each one at $25/day, then your total daily budget could go as high as $125. Multiply that by 31 Days Hath December and you’re up to $3875/month, which is frighteningly close to your $4k scenario.

2. Fund your account with a low-limit credit or debit card.

This bit of advice comes from Dave Jabas, a very smart online marketer who likes to expect the worst and prepare for it. (Dave, if you’re reading this, comment with your contact info if you’re willing to let folks get in touch with you.) In case Google goes haywire and starts attributing tons of clicks to your account, you have another circuit breaker protecting you.

Why You Don’t Care About Your Budget – Eventually

Suppose you do have a $4k/month Google bill, but you’re making $20k/month selling your stuff online. Do you care about the Google bill anymore?

Not at all.

Right now, use that Google budget to test and refine your site and your AdWords strategy.

Set up conversion tracking so you know, to the penny, how much each keyword is worth in front-end profits.

Experiment with your bids to see which positions bring you the best traffic.

Test pages on your website to improve site conversion.

And decide in advance how much money and time you can afford to spend on this marketing education. Until you have a profitable site, AdWords budgets are like "Fun Money" that you would take to a casino. Know what you’re willing to spend – and lose – to gain market intelligence, and don’t bid on keywords that are too expensive to give you enough traffic to test.

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  1. #1 • Unlocked GSM said on December 19 2008:

    I need to comment here. If you are in position 1-3 & your Max CPC is much higher than you Average CPC, DROP your bid price. Here is an example. I am running an Adwords campaign for a client and my default bid was $1.00. I noticed that I was in position 1-2 & my average CPC was 80 cents. I dropped my bid to 82 cents and I was still in the top 3 positions! Them my Average CPC went down a few more cents.