Understanding bidding basics

AdWords gives you several ways to bid for your ads, depending on what matters most to you and your business. Most advertisers focus on clicks, impressions, or conversions.

Now that you're advertising on AdWords, you probably have a clear goal in mind for your ads. If you sell coffee, maybe you want to get more people to visit your shop. If you run a hiking club, maybe you're aiming to get more people to sign up for your newsletter. And so on.

Knowing what you want your ads to do will help you decide how to bid.

Tip

AdWords runs an auction every single time it has an ad space available -- on a search result, or on a blog, news site, or some other page. Each auction decides which AdWords ads will show at that moment in that space. Your bid puts you in the auction.

You can focus on three different things when you bid: clicks, impressions, or conversions. Which would you choose? Let's look at these more closely.

Focus on clicks

If your main goal is to have people visit your website, then clicks are a good place to start. Use cost-per-click (CPC) bidding and you'll pay only when someone actually clicks on your ad and comes to your site.

CPC bidding gives you these choices:

  • Automatic bidding

    This is the easiest way to bid. Set a daily budget and let AdWords adjust your CPC bids to bring you the most clicks possible within that budget.

  • Manual bidding

    Take full control of your CPC bids. Manual bidding lets you set bids at the ad group level, or for individual keywords or ad placements, so you know you're bidding just what you want for the clicks that mean the most to you.

Example

If you run a hiking club in Vermont, you might want to bid a lot for direct-hit keywords like "Vermont hiking" and a different amount for broader keywords like "hiking maps."

Focus on impressions

Instead of paying by the click, you can pay by the number of times your ad is shown, if your campaign is targeting just the Display Network. That's called cost-per-thousand impressions (CPM) bidding, since you pay for every 1,000 times your ad appears. If you're mostly interested in getting your name or logo in front of lots of people, this is a smart option.

CPM bidding, like CPC manual bidding, lets you set bids at the ad group level, or for individual placements. Note that CPM bidding is only available for the following campaign types:

  • "Display Network only - All features"
  • "Display Network only - Remarketing"

Focus on conversions

With this advanced bidding method, you tell AdWords the amount you're willing to pay for a conversion, or cost-per-acquisition (CPA). A conversion (sometimes called an acquisition) is a particular action you want to see on your website. Often that's a sale, but it could be an email sign-up or some other action. You pay for each click, but AdWords will automatically set your bids for you to try to get you as many conversions as possible at the cost-per-acquisition you specified.

To use CPA bidding you must have conversion tracking turned on, among other things, so CPA bidding is suited for intermediate and advanced AdWords users.