Have you seen a situation where you try to enter a new competitive keyword and to even show on the 1st page you need to bid INSANE CPCs that CANNOT be justified to ANY of the players on that keyword? You probably have and so have I. So the popular wisdom says - bid the insane amounts until Google gives your ad enough "run" and decides to start bringing your actual CPCs into the realm of sanity. So I'd like ask you guys. How common is this phenomenon? Does it take a certain amount of impressions for Google to start adjusting your actual CPCs down? Or a certain length of time? What's been your experience? How have you handled this II phenomenon? P.S. Hypothetical numbers example. it's impossible to achieve a positive ROI for any advertisers for keyword "pencil" with actual CPCs above $0.30 But when you try to get your nose into bidding on this keyword... a bid of $1 gets you on page 5. You find out you need to bid at least $4 to even start showing on the first page. Ok that's the setup. How you deal with it - is what I'd like to discuss here. P.P.S. For the sake of discussion my QS on the keyword is Great or Good. So it CANNOT be used to explain the II phenomena.
That happens very often, when you add any keyword and Google says that the minimum bid is $5 or $10. The problem is that Adwords needs time to analyze your campaign and decided the minimum bid for that specific keyword. This usually takes 2-3 hours, sometimes less. So be patient. Let's say you added a keyword, put the bid that you would like to pay for that keyword and wait until Adwords analyzes it.
No this has nothing to do with it. Because my min. bid is $0.10 (and QS is good or OK) for example, but even a bid of $1 doesn't get me on the first page. You're talking about the situation when Google doesn't like your landing page and kills your QS and gives you $5-$10 min bids. That's not the situation I'm describing.
How would you ever know what other advertisers can justify? Maybe they look at LTV are willing to lose money on the initial sale(s). Maybe their page converts great and it's profitable, maybe they get a better price or commission on the product they sell, maybe they rent their customer file on the back end for additional revenue and so on.
For the sake of the discussion, yes, it's an assumption. But a VERY educated one. You just have to know the industry you're in. For example, $1 actual CPC may be justifiable for webhosting vertical but is insane for "funny videos". OK? Basically, you have to trust me on this, I know my industry and I know what's way out of the realm of profitability.
You're forgetting about account history here. If they've been there longer, they may be paying $0.25 for something you need to pay $1.00 for. I've seen it happen. The only way you can compete is to bid high to start, lose money and as you lower your bids, you'll eventually profit. It's also short sighted to say "it's not my quality score" because your QS may be great but the competitors might be "greater".
This response is most on-target, so far. PPCCOach, so could you describe the experience with actual CPC "eventually going down"? How long does it take for it to go down? Does Adwords need a certain number of impressions or certain period of time to pass by? Is the going down of actual CPC (while keeping the same position) gradual or sudden?
I'll have to disagree. What you're essentially saying is you know every possible way your competition could be monetizing their traffic and they can't be profitable. I've been the "other advertiser" who can't possibly be making money all the while I am. Anyway, to add a little to what PPC Coach said, see this: http://adwords.google.com/support/bin/answer.py?hl=en&answer=49044 In short what that says is all historical data is used to determine what you're going to pay and like PPC Coach said, if your competition has a lot of solid history they may be bidding substantially lower than you think they are. Related: http://adwords.google.com/support/bin/answer.py?answer=59642&topic=9355