Google Adwords Preferred Cost Bidding – What are the benefits?

By Michael Finnegan

Account Executive

Google Adwords have introduced a new bidding model known as Preferred Cost Bidding.  With the traditional model, advertisers set a maximum bid or amount that they are willing to pay for click for each adgroup or keyword.  This meant that they could pay any amount up to the maximum bid based on quality score and what the competitors were bidding.  As a result, the average CPC for an adgroup or campaign could not be determined until the campaign had generated some clicks and costs over time.

The Preferred Cost Bidding model allows advertisers to specify their preferred average cost-per-click.  The advantages, according to Google, are added control and time savings.  Adwords will work continuously to maintain the preferred bid by adjusting your individual bids.  As a result, your ad position may vary, however Google claim that fluctuations in position should be minor.  Also, keyword status should not be affected.

Google suggests that Preferred Cost Bidding is a better option for advertisers who know how much each click is worth to their business and who want their costs to be more consistent without constant monitoring. 

It really depends on your priorities as an advertiser.  If a consistent position in the sponsored listings is your priority then you’re probably willing to trade off a certain amount of control over your average CPCs.  Most experienced PPC campaign managers will be capable of maintaining relatively consistent costs for a campaign anyway.

For inexperienced or wary advertisers, or for new campaigns, it may be useful to specify preferred bids so that you know approximately how much you are going to pay for each click before the campaign begins.  With a daily budget set for a campaign, there is no fear of overspending so the real concerns are value for money and whether the fluctuations in position will be significant enough to affect visitor numbers.  This will only become clear with time.