How Mature is your Google AdWords Program?

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Before Google Adwords practice matured, there was the spray and pray mode of keyword bidding - companies just bid on search terms to drive traffic to a web site, and hoped that the additional visitors would do something profitable while they are on the site. Then came CPA, or cost per acquisition - companies started figuring out the cost per sale while bidding for different keywords. That's obviously better than spraying keywords, but it also meant the system treated keywords for a 30 dollar sale the same way it treated ones for a 200 dollar sale. A little further down the complexity line is CPV, or cost per value - automated increased bids for keywords that result to sales for high ticket items, and lower bids sales of items with lower prices. That's very effective if the profit margins are similar across different product families, and it's obviously better than CPA.

But that still leaves companies with varying profit margins with a less than optimal system. 

That makes newer automated approaches like CPP, or cost per profit, a welcome shift in the craft. CPP takes into account not just the cost per sale, not just the sale value, but the profit on each sale, and uses that to optimize bids. So if you're offering two items worth 200 dollars, and on item 1 you make 40 dollars, and on item 2, you make 20 dollars, CPP will bid more aggressively on item 1. This is just another step in making the technology adapt to the business, rather than the business conform to the technology.