So the company I work for started using AdWords' "Automated Rules" to automate the bidding process a few months ago. My boss set something up like this: Every morning, run a rule that looks at the previous day's data. If the keyword's avg. position is < 1.5, raise the bid by $1. He set no cap. After a couple months of this going on, I went in and noticed there were many keywords with bids over $20. Some close to $30. Keep in mind that in the past, we've never had to bid higher than maybe $10 to stay in the top couple spots. Consequently, our CPC skyrocketed for most keywords. I "fixed" the problem by (1) lowering all outrageous bids down to reasonable levels, i.e. $10 (2) Imposing a bid cap of $12 (3) Changing the rule to say that if the avg. position was > 1.2, lower bid 10%. If the avg. position was < 1.6, raise by 10%. My logic is that this would keep us in a comfortable position at the top, but we wouldn't be bidding for the top position. Unfortunately, our CPC rates are still considerably higher than they were in August, before we instituted these automated rules. My theory is that everyone else got on board with automated rules and everyone was trying to out-bid one another on every keyword, raising the average CPC for everyone...a boon for Google, but not good for us. Has this happened to anyone else? Any advice on where I can go from here?
I would not recommend automatic bidding for this reason. If you are managing thousands or even hundreds of keywords then it will be best to automate some how, and in that case try to set a cap. What ends up happening sometimes (from my experience) is that when you use the Placement/Diagnosis tool your ad will be showing up within the 1 position but the AVG position will be say 1.5. It will fluctuate but fluctuation from 1.5 to 1 is not bad AT ALL. So double check using the placement and ad diagnosis tool so investigate yourself on the progress of the campaign/keyword.