Are You Getting "Bumped" On Google Adwords?

After consulting with many people I've never seen so much confusion regarding how bids are determined by Google. 
Some people believe that you pay what your Max Bid is and others believe that you pay 1 penny more than the
person below pays.

Neither of those are actually true.  It's rather a combination of those.  This confusion has lead many to pay way to much for there bid position because they don't see the necessity in monitoring bids.

Let me give you an example:

Bidder 1:  Max Bid is .55 but pays .51 per click.
Bidder 2:  Max Bid is .50 but pays .21 per click.
Bidder 3:  Max Bid is .20 but pays .06 per click.
Bidder 4:  Max Bid is .05 but pays .02 per click.
Bidder 5:  Max Bid is .01 and pays .01 per click.

Hopefully you are seeing a pattern here.  The truth is that you actually pay only 1 penny more than the person below you's Maximum Bid.

But then why is it important to monitor bids you might ask if Google makes you only pay 1 cent more than the Max Bid of the person below you?

In the senario above the best value position is being in #2 because #2 is paying 30 cents less per click than bidder #1.   The bid gap difference between position #2 and #3 is only 15 cents.

So you can have nearly as many clicks as position #1 for over half the cost.  If you have 1,000 clicks position #1 is paying $510 and position #2 is paying only $210.  You are saving over half which means increased profit margins for your company.

But here a bidder can use a dirty trick to raise how much you are paying per bid with a little known technique which I call Bumping!

Let's say you are Bidder 2 and you get used to paying 21 cents per click.

If Bidder 3 is savvy (and more and more bidders are) he could Bump up what you are paying. 

He/She can increase their Max Bid to 49 cents, while still only paying 6 cents per click. All of the sudden you are paying over double per click than what you were paying before.

With Google being more and more competitive this is happening more frequently and is used to cause you to over pay for your clicks, put you out of business or drop your position, so that they can take over position #2 for a lower cost than what you are paying.

To avoid having this happen to you, you really need to monitor all of your bids to make sure that no one is "BUMPING" you.  However, since everyone is always changing their bid prices over the many keywords you have, it is nearly impossible to keep up with monitoring this without a specific software...

Affiliate Marketers Will Never Make a Dime Using Google Adwords

Most people start off their affiliate marketing business by getting traffic from google adwords. I know, because that’s how I started. If your anything like me, you purchased Google Cash or another pay per click ebook and you set up your first campaign. Later on after many campaigns you found out that it was a lot harder than you originally thought.

Here’s why! Pay per click advertising works well for businesses that can count on repeat business. As an affiliate you usually don’t have that luxury. Your relying on one purchase per customer and then you’ll probably never see that customer again. A good E-business on the other hand knows that with every person that becomes a customer they can rely on x number of purchases from that customer. This also allows them to bid significantly higher than affiliates because they can make their profits from the back-end.. A business that can rely on a minimum of four purchases per customer for example, can burn up their profits on the first and second purchases and still make profits on the third and fourth purchase.

The last reason affiliates have a hard time is because conversion rates for a typical pay per click campaign average less than 1%. Its hard to make a profit with that kind of conversion rate. I’m not saying its impossible, but affiliate marketers utilizing pay per click advertising for their traffic are definitely fighting an uphill battle.