The Google Bid Simulator tool is aimed to show “missed opportunity”, adds a level of transparency to the Google Adwords auction-based PPC system, provides advertisers with a better picture of the trade-off between cost and click-through volume, simplifies the bidding process by eliminated trail and error and gives advertisers insight so that they can make more informed bidding decisions.
How Bid Simulator Works
When Google Adwords advertisers access their Adwords account, they’ll see a blue Bid Simulator icon next to keywords’ Maximum CPC Bids label. Clicking on that icon will bring up the bid simulations for that particular keyword. The Bid Simulator uses data from the previous 7 days from a particular keyword and based on that information, it will show up a couple of different “simulations” for that keyword. For keywords that receive a low number of impressions the Bid Simulator shows an approximate number of impressions, estimates the number of clicks, the click cost and the average position for a bid that keyword may have generated based on a higher or lower maximum CPC (cost-per-click) bid. If a keyword receives a minimum number of impressions below a certain threshold the Bid Simulator icon may not appear.
Within the Bid Simulator advertisers can select any of the bid prices that are presented and change the bid within the tool. While this may be increasing the transparency of a “black box” auction-based bidding system, this is hardly going back to the days of knowing what you had to bid to get a certain position. Google stresses though that this is just a projection; and that advertisers won’t necessarily get exactly those results. The Google Adwords blog cautions that “past performance does not guarantee future results.” There are so many factors that go into keyword bidding that there’s no way to predict future campaign performance.
While the Bid Simulator isn’t an exact blueprint for a bidding strategy, but what it can do is make projections so that advertisers don’t not have to. Advertisers could look back at their past results and use them to predict what effect bid changes will have on the keywords in their campaigns. However, for the keywords that get sufficient traffic, Google is doing that already with the Bid Simulator. And, because Google has access to information about the campaign quality score advertisers can be sure that their projections are going to be a lot more accurate than any they could have come up with on their own. Advertisers can use this information to their advantage when plotting out future budgets for their campaigns.
However, for the keywords that get sufficient traffic, Google is doing that for them with the Bid Simulator. Since Google has access to quality score information of all advertising accounts advertisers can be sure that their projections are going to be a lot more accurate than any they could come up with on their own. Advertisers can use this information to their advantage when plotting out budgets for their future advertising campaigns.
It’s interesting to note that Yahoo has a similar tool, which has been active ever since they launched the new Panama system three years ago. Yahoo refers to it as “bid forecasting” and it’s available by clicking on any keyword in a Yahoo Sponsored Search campaign. Once again, the projections are based on previous data, so the more traffic a keyword gets, the more information the program can use for the forecast. Yahoo offers up a few more metrics in their projections (average position, CTR) but the projections are thought to be less accurate. Again, the best way to use this tool is to make future projections, not necessarily take it at face value as a keyword bid recommendation.
The Bid Simulator is being touted as a great addition to the tools Google Adwords already has at its disposal. Once again they are overshadowing Yahoo, despite the fact that Yahoo already has it’s own version of the tool. The Bid Simulator tool is coming across as making the auction in Google Adwords more transparent, but advertisers should be cautious. Remember that there are other factors like ROI that dictate how advertisers should direct their bidding strategy. When used as a projection tool and as a measurement of missed opportunities, the Google Adwords Bid Simulator can be a powerful tool in the hand of a skilled Google Adwords advertiser.
Google’s Bid Simulator Tool Adds More Transparency to Adwords Keyword Bidding
