If you are using pay per click search engines to drive traffic your site, keyword bidding is the most important part of your PPC campaign.

Two things are important here:
1) what keywords to bid for, and
2) how much to bid?

You can find the keywords for your site with the help of your knowledge and some software. Please read my article on how to do keyword research for your site for more information.

Before proceeding further let me tell you something about how pricing is done in major PPC search engines.

If you have gone to an auction you must have noticed how the price of the item being auctioned increases if more people want to buy that item. In other words increase in price of the item is directly proportional to number of bidders. If there are more bidders then the price of the item keeps rising until it reaches a point where there are no more bidders. The last person who had bid the highest gets the item.

Another important factor is the minimum bid price set for an item. Bidding starts from this price thus eliminating any chances of hoax by bidders.

Keyword prices are also decided by an auction. The system is similar to an auction, except that it’s not an open auction. You will never know how many bidders are there for that keyword, but the system gives you an idea of where you can expect your average ad position for a certain amount. Of course a minimum bid is set for every keyword. Google has a minimum bid of 1 cent.

The bottom line is your ad position will be decided on how much you are willing to pay for that keyword. Of course search engines such as Google take into consideration other factors also like the Quality Index of you ad, landing pages, historical click through rates etc before deciding your ad position.

Since there are many factors that decide your ad position, you almost always pay less than the maximum you are willing to pay per click.

Lets get back to the article question – how much to bid?

It depends on how much that keyword is worth to your business. If a keyword is giving you a lot of business, bid as high as possible to get most impressions and clicks. Bid average for keywords returning average ROI, and low for keywords giving low ROI.

See your data every month and review the situation. If you feel bids should be raised for certain keywords, do it. Similarly you may want to lower bids for the keywords that aren’t performing well.

If you have a huge list of keywords, it may become difficult to manage and may be highly time consuming. In such a case I advise you use a keyword bid management tool.

A keyword bid management tool is software that can keep track of all your campaigns and change bids of individual keywords automatically.

While a keyword bid management tool saves you a lot of time, still its advisable that you check your stats manually at least once a week. This will help you to know what exactly is happening to your keywords and campaigns.

Remember, when you do PPC, the most important factor for you should be your return on investment since you are paying per click.

Don’t bid so high that you get a negative ROI, and don’t bid so low that you get low quality and less visitors.

Bid rationally.

PPC or Pay Per Click Search Engine Marketing is a way to market a website where the owner of the site pays money to the search engine that brings visitors to their site. It is also known as CPC or Cost Per Click Marketing. Needless to say the owner pays for every single click.

Pay per click is a very fast way of generating traffic to a site. You register with a search engine, write an ad and select some keywords that are associated with the ad. That’s it – within minutes you may start seeing traffic to your site.

Well its not so simple as it sounds! The problem is pay per click has evolved into a huge market and “buying” traffic for popular keywords is getting unaffordable day by day. I am talking about the business generating keywords.

Just to give you an example. If you are a realtor you may want to buy traffic for the keyword “real estate”. I am sure this will cost you about 2 dollars per click or even more in major search engines like Google and Yahoo. How many business people can afford that?

Important Note: There are many smaller PPC search engines. They may be cheaper. Don’t ever try your luck with them. Most of them send junk or robot generated traffic and you will loose your hard earned money. This is known as “click fraud” and requires another post.

Don’t make a gloomy face. Though the PPC is costly, there are ways to get traffic at a reasonable cost.

You must have heard about long tail keywords. A long tail keyword is a set of keywords or keyphrases which are actually long. For example “pay per click marketing service in Washington area” or “find a home under $25000”.

As you can see the long tail keywords are very specific searches and may produce high conversion rates. The only problem with long tail keywords is their volume is low. But long tails come at a much lower cost than primary keywords. So if you have just started a PPC campaign and are not a very rich person, I recommend using long tail keywords to start your PPC campaign.

Another way to reduce the price you pay per click is making sure your ad gets above average clicks than others that are competing with your ad. If your ad gets more clicks than others that are displayed along with your ad, the search engines will think your ad to be of “higher quality” and so will reduce the price you pay per click. Higher your click through rate (CTR) lower the price you pay per click. Please don’t click your own ads, the search engines have ways to know it and may not include your clicks in the CTR algorithm. Worse you may end up paying for your own clicks.

You should also make sure your landing page satisfies the need of the visitor. Search engines now days take into account the quality of the landing page too. The better the quality of the landing page, the lesser you pay.

Always keep a check on your ROI (Return on Investment). If you are not making any profit, it’s advisable to pause your PPC campaign.

If you keep these things in mind, I am sure you will have a profitable PPC campaign.