Bidding for the highest paid positions on a search results page may not always make the most sense for advertisers, according to research recently released by search advertising technology provider AdGooroo.
The report, based on data collected during December, analyzed the impact of keyword length and ad position on click-through rates (CTR) and cost-per-click (CPC) within Google AdWords programs. For the report, AdGooroo analyzed search phrases used by a variety of industries, products and service offerings.
“There’s a lot of anecdotal research or hearsay about click-through rates or cost-per-click— whether it’s better to be at the top of the page or the bottom of the page,” said Richard Stokes, president and CMO of AdGooroo. To address this debate, AdGooroo used data from Google Adwords to quantitatively measure the correlation between CPC, CTR and average ad position, he said.
In general, the study indicated that bidding for top ad positions makes the most sense for high-budget advertisers who are looking to build brand awareness, Stokes said. “For most advertisers what we found was that with few exceptions the most profitable spots are right at the bottom of the page — around position six or seven,” he added. These are spots where a direct marketer would find a “really good” return, he said.
Overall, the report recommends, “performance-based advertisers should bid conservatively for broad search phrases and more aggressively for longer, niche search phrases.” For niche phrases, the report states, advertisers should bid high enough to reach position two or three — unless tracking suggests that a higher position would be profitable.
But there are exceptions to these rules, Stokes noted. In order to determine if it makes sense to bid higher or not, companies should evaluate their conversion rate, average order size and the bid price that gets them to position eight or so on the first page of search results, he said.
According to the report, if the conversion rate multiplied by the average order size is more than 10 times the CPC at position eight, then the bid should be increased “until it shows up in the top half of search results.”
