by Mark Palony

Special to the eTail Blog

Bid testing in paid search has developed a reputation as a risky activity and, when executed poorly, that reputation is deserved. When done well, however, the information learned through bid testing can significantly improve paid search financial performance. Still, with its reputation preceding it, many digital advertisers say they avoid the risk and forego bid testing altogether.

Bid Testing Methodologies

In its simplest form, bid testing means changing a bid and observing the results. This is a practice most digital advertisers employ, even those who believe they are foregoing bid testing. But simple bid testing is not the same as structured bid testing.

There are three approaches to structured bid testing, each with the purpose of discovering a keyword’s “sweet spot,” or the best bid for a specific ad, keyword and budget combination all aimed at achieving the advertiser’s global financial goal. However, there are significant differences in methodology and results.

Position-Based Testing:
Postion-based bid testing answers the question: What do I have to pay for position, and does the conversion rate or value per click change at different postions? Although popular and easy to execute, position-based bid testing can be very expensive, especially if the positions you are testing for are well above the value-per-click of the keyword being tested. In such cases, you are likely to drive up the number of clicks without a corresponding increase in conversions, leaving you with significantly higher costs and little, if any, incremental revenue.

Current Bid-Based Testing:
Here, the baseline used for testing is the current bid, whatever that happens to be. To execute, bids are varied a small amount above and below the current bid. The risk of loss is all but eliminated, but the probability of improving financial performance is also decreased.

Value-Based Bid Testing:
Value-based bid testing uses keyword performance as its guide. Regardless of position or bid, value-based testing tests by moving up and down around a bid that matches the keyword’s average value per click. Properly implemented, value-based bid testing reduces the risk of loss while maximizing the probability of improved performance.

Test Small, Test Often

Internal changes to financial goals combined with the constant changes of a dynamic marketplace make bid testing necessary to keeping a paid search program competitive and profitable. And choosing the proper bid testing approach is as important to paid-search success as the choice of keyword bid optimization.

OptiMine Software’s new whitepaper, “Bid Testing Best Practices,” takes an in depth look at all three bid testing methodologies and illustrates how the same data can lead to different conclusions, depending on what is being tested. Download your free whitepaper here.

Mark Palony is the Director of Marketing for Optimine Software, a provider of bid optimization software which helps forecast the performance of each paid search ad placement each day and automatically sets optimal bids. This post has been brought to you by Optimine.