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  • Position Preference Bidding: A waste of time?

    It is a PPC truism the ads in the top two positions get too many “curiosity clicks” and tend to convert poorly in comparison to ads lower down the page. I guess the thinking is that people who bother to read past the first couple of lines on the SERP are serious buyers. (So much of a truism that I can’t seem to find one blog post to link to that deals with this. Maybe it is a Richard Fergie truism rather than an industry wide one).
    This all seemed to make sense so I introduced position preference bidding for one of our clients last week. There was no lower limit on ad position but the ads should not have appeared higher than position 3.  In the clients own words the results were “a little grim to say the least.” Conversion rates dropped over 10%. O dear.

    I should’ve used my head and done some number crunching beforehand. Instead I’ll do it now and share the results with you. I know how much you love graphs, so I’ll even throw in one of them. Just for you.
    The data comes from clients that use conversion tracking and for whom I also had last months data already cached in AdWords editor. For each ad group (over 2000 in total) I’ve plotted its average ad position against its conversion rate. Conversion rates can be very different across different verticals so this figure has been expressed as a percentage of the account average. A logarithmic scale has been used for the conversion rate percentage to try and space the data points out a bit.

    Kevin’s comment when he saw this was “that looks like a bit of a mess” and I think he’s right. The graph is dominated by travel pay per click campaigns and recruitment accounts which make a big cloud in the middle. There seems to be a dramatic tail off in conversion rates for the DNA testing vertical about position 5.2 but this data is from only one small account so it may not be that accurate.

    So what does this mean in terms of position preference bidding? It all depends on how much you have to pay for the top spot.  As this next graph shows, there is a definite increase in traffic associated with the top ad positions (the trend is exaggerated when a logarithmic scale is not used) so the higher placed your ad the more conversions you’ll get. The trend is not as pronounced as I thought it would be, but there is a correlation there.

    If the cost/conversion is low enough you stand to make a lot of money, but if the CPC pushes your cost/conversion too high then it might not be worth bidding for the top spot.

    To calculate if bidding for the top spot is worthwhile you need to decide if the tighter margins you’ll get as a result of increased ad spend is worth the extra sales. In some cases it will be, in some cases it won’t. I think my first graph shows that, at least in the verticals tested, there is no sweet spot for ads where conversion rates are high and prices are cheap. It comes down to a quite simple equation; make more on a tighter margin with a higher CPC or make less but have more profit on each transaction.

    My own placement preference bidding experiment was a failure; let me know if you’ve had any successful ones.

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    4 Responses to “Position Preference Bidding: A waste of time?”

    1. Eugene says:

      Nice article. Thanks. :) Eugene

    2. alex rothaus says:

      Great Post. I would love to see a graph of the cost per conversion% (VS GOAL Cost Per Conversion) on one axis and the average position on the other axis. This would be a better indicator of bottom line success. Even if the conversion rate tripled, it might be a loss due to a 5X increase in CPC. All in all great findings.

    3. Sam Brown says:

      Why didn’t draw a regression line as well? Also, you might have come up with some coefficients and asome measures of goodness of fit. But very nice indeed. What program did you use for the graphs?

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