Aiming for #1? How Lower Ad Positions Can Lead To Higher Revenue
The ideal average position debate has been one going on forever. But, if I’ve learned anything about ad position from my 2+ years in paid search, it’s that your ideal position will vary a lot by client and no assumptions should be made. Testing is always the best option with almost everything in PPC and this holds true for ad position too.
Last year, when one of my clients had to scale back on their paid search budgets due to internal restraints I realized we could potentially save a lot of money by testing lower CPCs and positions. Since we were consistently hitting our daily budgets, I knew there was more traffic out there we were missing.
The screenshot below shows our Desktop campaign trend for 8 months. The month of September is where I started to scale back on bids. From August to November our CPCs dropped 23% and our average position dropped from 1.7 to 3.1.
What’s more interesting is what happened to our traffic. From August to November our clicks actually increased 11%, while our cost fell 14%.
While this was good to see, we all know traffic doesn’t equal conversions, revenue or lower costs per lead. So what’s the potential there? I’ll walk through a few examples of impacts to our bottom line.
For this exercise, we will make two assumptions regarding our historical metrics for the last 6 months:
- A conversion rate of 11%
- An average order value (AOV) of $30
With these assumed figures, below is what our revenue for August – November would look like having lowered our bids 23% overall as we did.
Looks pretty but doesn’t mean much if we don’t have anything to compare it to. Let’s say I didn’t change our bids at all, and we stayed at $1.75 (August’s CPC) through November, but our costs for each month were the same. The revenue numbers look lower without any bid changes…
With a 23% drop in CPCs, incremental revenue would be projected to reach almost $10K in just 3 months. When you hit one year, that’s almost $40k in additional revenue with less spend (if CTR and conversion rate remain consistent).
This was simply one bid change test result; needless to say these types of changes can get mixed results, but the important thing is to test them, since it’s possible to tap into unexpected potential. On the other hand, some clients have been proven to perform much better when in position 1 or 2, as performance and the incremental value of saving money on position 3 doesn’t work for them.
When should you look at this? Where can you start? I’d say if you hit your budgets throughout the day and you’re in position 1- 2, there’s probably opportunity to lower your bids. Download a simple ad group or keyword report so you can analyze your ad groups or keywords by position, and look for any trends to help you develop a hypothesis from which you can start.
Feel free to share your ad position strategies below. Good luck & happy testing!