A Different Kind of Auction

As we talk about auctions and bidding on keywords, you may be tempted to think of that end table you bought down at the Auction Barn last Tuesday. But there are big differences. Although you say you’re bidding on the keyword, what you’re actually bidding on is the placement of an advertisement containing the keyword. And there are numerous placements, numerous times per day, and probably millions of searches in which the ad could theoretically be displayed.

So, let’s say your maximum bid is $1 on a keyword of your choice. This means that every time your advertisement is shown, you can be charged up to $1. Now if someone else comes along and bids higher than you, that person’s ad will be shown in a more optimal place than yours.

Because it’s possible that you’re being charged $1 every time your ad is shown, your advertising budget could be inflated to a sizable bill within 24 hours if your ad were shown every time the keyword you’re bidding on was shown. So to keep the advertising budget manageable, you can put a cap on your budget for each keyword.

If your budget for that keyword is $25 a month, and the word stays at the $1 level (it can drop below that at any time, depending on what your competition’s highest bid is), your ad can be shown 25 times a month. But the price of words (or the ads in which they appear) is dynamic, going up and down as other ad owners increase or decrease their bids. If the price drops below $1, this increases the number of times your ad can be shown, and any amount over that $1 bid decreases the times it will be shown.

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I will be covering the topic about managing keywords and PPC campaigns this week. So, stay tuned on this blog to see more of keyword and PPC updates during this week.

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