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Bidding and Optimization

Home > English > Bidding and Optimization > Bidding Basics > Bid Calculation Method

Bid Calculation Method

Calculating Conversion Rate

Our bidding system uses a blending technique to calculate a best-guess bid for each keyword, even if there is little data for the individual keyword. The estimation technique combines data about related keywords with actual observations.

Our algorithm looks at the Bid Strategy, the individual keyword, and then the best-guess combination. Based on the conversion rate for each, and the number of clicks and conversions the keyword has received, the bidding system calculates a 'Best Guess' conversion rate and Revenue Per Conversion that will be used to calculate the keyword's bid. If the Bid Strategy is set to have a fixed conversion value (CPL and Performance Marketer), that specified Revenue per Conversion will always be used.

If the keyword has moved Bid Strategies during the day, its current Bid Strategy is also displayed; however the bidding statistics will be pulled from yesterday's Bid Strategy. If the keyword has no clicks, the Bid Strategy data will be used to determine the bid; If the keyword has enough clicks to 'stand on its own' the keyword will be used to determine the bid.

Calculating Revenue Maximizing Bid

Target Bid

  • The Target Bid is calculated as follows for Bid Strategies using Cost per Lead as their revenue model:

Target Bid = Specified Cost per Lead * Conversion Rate
 

  • For all other revenue models:

Target Bid = Revenue per Conversion * (1- Target Margin) * Conversion Rate

Max. CPL (or Min. Margin %) Target Bid

The platform also calculates a Max. Cost Per Lead (or Min. Margin %) bid. This bid is applied when the Target Bid described above is less than the keyword-specific minimum bid (applicable to Google and Yahoo), in which case pushing it would render the keyword inactive.

  • The Max. CPL bid is calculated as follows for Bid Strategies using Cost per Lead as their revenue model:

Max. CPL Bid = Max. CPL * Conversion Rate
 

  • For all other revenue models:

Min. Margin % Bid = Revenue per Conversion * (100% - Min. Margin %) * Conversion Rate

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