Why Flat-Rate PPC has Disappeared into the Ether

Lorna Gill Posted by Lorna Gill

Bid-Based PPC is a more dynamic and flexible version of PPC than the more old-fashioned flat-rate PPC and if you’re looking to maximise efficiency, it’s a good time to switch.

If you work in paid search, you’re probably more familiar with it being a bid-based system, but believe it or not, there was once two types of regularly-used PPC: flat-rate and bid-based.

You may not be overly familiar with flat-rate Pay Per Click (PPC) marketing, because it’s only used by a few big players, but it’s where advertisers pay a set fee for sponsored search results or other ads each time a user clicks on them. It’s an antiquated system and now has been almost completely replaced by the more dynamic and effective bid-based PPC system.

Although there’s more risk involved with bid-based systems, you may find your ROI increases as a result of some healthy competition. In this article, we walk you through what you need to know about bid-based PPC and how it can work for you if you’re one of the players still using fixed-rate PPC.

Flat-rate PPC vs Bid-based PPC

With flat-rate PPC, brands paid a pre-established fee per click—that is, each time a user searched for a keyword and clicked a sponsored result, the brand pays a set fee that will be deducted from their budget. These fees are set between the advertiser and publisher (search engine).

Flat-rate PPC targeted at a more specific set of keywords and was used more commonly by comparison sites such as Kelkoo and Pricegrabber.

In these scenarios, the customer had already made a decision about what they want to buy but are just trying to find the best price for it.

With bid-based PPC, any brand that wants to feature in the results for the keyword will set a maximum price per click they are willing to pay.

Then, once a user plugs in keyword-X, an automated auction takes place between the brands that bid on keyword-X, with the highest-bidding (and highest in some other respects, but we’ll get to that) brand featuring at the top of a list of sponsored results that appear to the right of search results.

The brand will then be charged according to their bid if a customer clicks their ad. Because of the dynamic nature of the process, the price per click can vary constantly as demand fluctuates.

The Finer Points

As Timothy Lemke from Local Fresh notes, there are a number of factors that affect the placement of your ad, aside from your bid. Firstly, the search-engine will predict the relative click-through rates for each ad and rank them with the highest first.

Search-engines will also look at the text of your ad, and rank it according to the extent to which it matches the keywords that the user searched.

Finally, the search engine will look at your landing page and evaluate whether it has unique content and, very importantly, content that matches the user’s search terms.

If two brands bid the same amount on a given keyword, the one that excelled in these other criteria would rank highest.

Take a look at the screenshots below. They show the results page from Google for the search term “car insurance” and were taken two days apart. Notice how the order of the ads running down the right is different between the two shots. This represents the auction process and how the brands favour differently as time goes on.Results1

 

Results2

Should I Use it?

Clearly, this form of marketing is far more flexible than fixed rate. You control, to a greater extent, what level of price you pay, and get results that you can afford.

Bid-Based PPC is suited to companies whose goal is to build a strong brand via their site and search results. Because a better landing page and better ad-text means that you will appear higher in the results, brands can work to do far better in this game without spending more of their ad-budget.

However, as Let’s Get Wise reports, ‘bid-inflation’ can be problematic within the bid-based system. This usually happens when a brand that considers itself to be the top-player within a certain industry will stop at nothing to maintain its top spot in the sponsored results. This can massively increase the cost of certain keywords, making them unaffordable for new businesses.

Why You Need to Use Bidding-Management Software

Does bid-based PPC sound complicated? It is, meaning you should use a platform to help get the most out of bid-based PPC.

There are a number of good platforms out there that provide a range of different features between them.

Marin is very feature-rich. For example, a brand can set a number of conversion targets (like the user accessing contact details for a store, or buying a product) and set up an automatic response in the form of a change to the bidding for a relevant keyword. The platform allows you to access current and reliable data to optimise campaigns effectively and you can set bids based on a variety of precise goals, including multiple conversion events like video views, contact forms and store directions.

Alternatively, Adobe’s Search Centre is a very user-friendly option, integrating site data and search engine data, so that the results are clearly visible and accessible. For marketers that are time stretched, Search Centre is a good option because it allows automation of repetitive tasks and can deliver custom reports that show you only the data you need.

Other platforms include Kenshoo, which allows users to oversee and manage their ads with a number of key features that automate the advertising process and Aquisio, in a similar price-range to Kenshoo. With what its team calls “rocket science”, Aquisio will adjust your bids every 30 minutes, thus constantly refining for best results.

You can probably see when reading over just a few of the features that bidding-management systems are likely to be very beneficial to your company. Without the insight, oversight and automation that they offer, advertising would be far less accurate, more expensive and far more time-consuming.

Bid-based PPC may very well be the right option for your brand. But while the advantages that it offers may be clear, it’s important to remember that information and planning are fundamental to any campaign. As a result, you may wish to explore one of the systems discussed above, or consult Adthena’s Competitive Intelligence for Search tool to help you decide which keywords to bid on.

Have you used bid-based PPC before? Did you use a bid management system? If so, what were your experiences using these tools?

(Main image credit: Jerry Nihen/Flickr)

About the author

Lorna Gill
Lorna Gill
Lorna is responsible for acquisition marketing at Adthena, communicating their award-winning product and generating demand. She has developed her career in fast-paced, start-up environments, including two tech track 100 companies and is passionate about translating technical information into stories that excite and delight.