Google's Bid S[t]imulator

It's been 6 years now that I've been on the sales side of hundreds of SEM discussions with advertisers and agencies, with much of that time spent discussing the importance of instrumenting SEM campaigns so that the all-important data (Green Gold as we call it here at Omniture) can be captured and used to optimize to business goals. As a third party vendor who must add value to clients' SEM campaigns to justify fees, our interests are fully aligned with the ad spender.

In an interesting twist, however, Google's now offering the Bid Simulator, a tool that purports to simulate traffic levels at various CPC's the advertiser could choose. This is interesting for a number of reasons:

Data Accuracy: those who've been in SEM for some time know full well that Google's primary attempt at estimation - Traffic Estimator - has been so far off from actual traffic levels advertisers see as to be laughable. Now, though, Google's offering - for free (Warning, Warning, Warning) - to help advertisers see how much more traffic they could get if they would just try the [mostly higher] CPC's Google suggests.

Motive: searchers increasingly know where they're trying to go, and thus reliance on paid ads to get there has leveled off. For proof of this one need look no further than Google's latest financial results, which showed negative sequential click volume growth. Were it not for miraculously higher CPCs, GOOG would be, well, just GOO. Most industry watchers can't explain the rise in CPCs for the simple reason that the economy still stinks, and CPC's tend to track to ROI. So how did Google get 5% growth in CPC's in Q2? Part of it was changes in exchange rates, but part of it was, as Google execs said on their earnings call [I paraphrase here] "Over a dozen ads quality improvements that had higher than usual impact."

Did you notice the quality of ads improving? I sure didn't, and so I'm left wondering if ads quality improvement means improvement for Google itself in the form of higher CPCs despite flattish ROI.

And so back to the Bid Simulator; advertisers & agencies who are trying it are most typically seeing Google suggest bids that are so far above the campaigns' optimal settings as to be laughable (see this SEW Forums thread).

Given Google's historic inaccuracy when it comes to advertiser-specific traffic estimation, coupled with the fact that Google's under duress to buck the economic winds flailing their business, I suggest advertisers think of this new feature as the Bid Stimulator, and treat it accordingly.

[9/1/09 note: someone came to my blog after searching for 'Google Bid Stimulator' just now. Freudian slip, me thinks.]