Overture Bidding: Autobidding

September 30, 2003

Auto bidding is when your ad paid cost is automatically lowered to $0.01 above the next lowest competitor’s max bid.

Auto bidding is when your ad paid cost is automatically lowered to $0.01 above the next lowest competitor’s max bid.

For example.

Advertiser 1’s max bid is $0.50.
Advertiser 2’s max bid is $0.35
Advertiser 3’s max bid is $0.20.

If all three of the advertisers were using auto bidding, the actual paid cost would be:

Advertiser 1: $0.36 ($0.01 above bidder 2’s max CPC of $0.35)
Advertiser 2: $0.21 ($0.01 above bidder 3’s max CPC of $0.20)
Advertiser 3: $0.10 (assuming there is no 4th bidder, their cost would be the minimum bid allowed by Overture, $0.10).

If advertiser 2 changed their max bid to $0.49, then advertiser 1 would still be in first place with a bid of $0.50, and they would pay $0.50 as that is $0.01 above advertiser 2. However, advertiser 2’s paid CPC would not change as advertiser 3 did not change their bid. This would cause advertiser 1 to be paying over double of advertiser 2’s bid. (This is known as Price Pinning - see bidding strategies for more information).

This is causing advertiser 1 to pay a lot of extra money per click. Moving the bid down a few cents could save them $0.29 per click. This amount of savings over the course of a month, could save them hundreds if not thousands of dollars for a broad keyword. When you consider this is only one keyword, and most accounts can have over a hundred, this type of savings can quickly add up to a lot of saved dollars.

There are bidding software solutions that will automate this procedure. It is very useful for those who do not have the time to track bids and competitor movements on a daily basis. Do not rely on this software to do everything for you. While it is a useful tool, it is still recommended you manually check on accounts, or have an account manager, who will keep an eye on your pay per click expenditures.

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