How does ad position affect PPC strategy?
Friday, August 21st, 2009Google’s Chief Economist Hal Varian recently posted a note on the Inside AdWords blog stating that ad position on Google’s search results does not affect on site conversion. This may not be supprising given that the comparison is made using the same ad on the same search results page clicking through to the same site, the only difference being psition.
Varian acknowledged the widley known fact that a higher position does however yield more clicks. Google positions ads based on bid price and quality so better quality ads and higher bid prices will result in better positioning, more clickthroughs and ultimately more conversions, but the on site conversion rate will most likely be the same or similar compared with ads that appear lower down.
Does this insight affect PPC strategy?
It depends. PPC doesn’t just have to be about clickthrough rates and conversion rates. Volume and cost of aquisition / margin also come into the equation. A lower bid on a high quality add will probably drop it down the pecking order restuling in fewer clicks and few conversions but because the bid price is lower the cost of sale will also go down and margins will go up. However gross sales and revene will suffer.
A higher bid on a high quality ad will have the opposite effect with gross sales and revenue going up but at a greater cost which in turn may reduce overall profitability. Equally, money saved by bidding low could be siphoned off into other strategies such as SEO which in the longer run could yield both high volume at a lower cost.
