I have been using Google’s AdWords Cost Per Action (CPA) bidding for a number of years. I set the maximum I was prepared to pay for a conversion (e.g. a successful install of my software). AdWords then set the bid price to try and get me conversions at that price or less. It worked pretty well for a number years and it saved me a lot of time tweaking bid prices. But Google recently phased out Maximum CPA bidding and forced me to switch to Target CPA bidding. From this point I could only specify the average price I was prepared to pay per conversion. This is where it all started to go wrong.
AdWords started to bid crazy prices. Check out the screenshot below. You can see that in each case the average Cost Per Click (CPC) is more than the CPA price. For example, in the first row I have set £0.50 as the price I am prepared to pay for conversions from the ‘seating charts’ ad group. Typically about 10% of people who click on one of my Adwords ads will install the software and trigger a conversion (which is fairly standard). So a £0.50 CPA means that AdWords should be bidding somewhere around £0.05 per click. Google knows this, because they have vast amounts of data from my AdWords account (11 years worth). But the average price for the last 3 clicks was £1.17 per click. WTF Google – that’s my money!
Given that the base version of my software costs £19.95 (one time fee) there is no way I can make a profit at £1.17 per click. Not all the bids are this crazy. But there are enough crazy bids to put my whole AdWords campaign into a tailspin. So I have been forced to switch back to manual CPC bidding. If you have also been forced to switch from Maximum CPA to Target CPA bidding, then I suggest you keep a careful eye on your cost per click.
Successful Software 
Even CPC bids are crazy. These days, campaigns don’t even star to get impressions till you are ready to give $1.50 or better per click for anything to do with the word “software’ in it. Adwords does not seem viable for small software businesses selling products in the range $50. Has anyone tried CPC with display advertising? What are the typical costs per click for advertising on download sites?
Sanjay,
Bid prices vary a lot depending on how competitive your niche is. But average bid prices have certainly gone up a lot in the last 11 years:
On the other hand, I have seen quite a lot of AdWords campaigns that are highly sub-optimal in there set-up.
I know that. But I have used adwords since 2000. And till about 2008, the bids were quite reasonable. You can see the effect. Type some regular software related keywords and you won’t see any ads. Google has lost all small software vendors like us. Even if they do, they don’t last longer than a few months. May be some people higher in the Google Adwords management would care but it’s not possible to reach them. When you send any kind of feedback to Adwords support, you get stock replies asking you to raise your bid prices. Quite frustrating.
I gave up on AdWords after two things. One was when I noticed that decreasing your Maximum CPC would decrease your Quality Score. That’s just blackmail: “Nice ad campaign you’ve got there, but it seems you’re not paying us very much money… shame if we decided your ads weren’t relevant and refused to show them.”
The second was an email containing this gem:
“To help you get started with your ‘Attach’ campaign, check out the following suggestion.
Keyword: visual studio attach debugger
Clicks: 5
Estimated first page bid: £550,000.00”
Thanks AdWords, but I’m working to a strict budget of half a million pounds per click. Also, you are clearly a bunch of utter muppets and I’d rather sink into obscurity than do business with you.
Google are doing everything they can to inflate the bid prices. It is pretty sleazy.
>Estimated first page bid: £550,000.00
Have you still got that email? Surely you could get on the first page of Hacker News with that!
I do have the email, but it’s three years old now, and would be easy to fake – plenty of people would (rightly) question whether it was genuine. Including me, at the time!
Hi Andy, I’m a bit confused about the numbers. Why isn’t the target CPA (screenshot) much higher? I would have expected it at 30-70% of the sales price…
Because the conversion is a download (actually a download and successful install), not a sale. I could just measure sales conversions, but that would mean a lot less conversion data for it to work off.