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Bidding and Optimization

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

Bid Calculation Method Advanced Guide

Bid Details Page

After bidding has run, you can view the details of how a bid was calculated on the keyword or group bid details page. To view bidding details, click on the keyword/group and then click on the Show Details link in the Recommended bid section.

Note: The following does not apply to position-based bidding. Conversion rate calculation methodology applies only to algorithmic bidding, not portfolio optimization. 

Calculating Conversion Rate

Our bidding system uses a statistical technique called Bayesian Estimation 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.

The top of the bid details page shows the performance/metrics for the folder, 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 folder 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 folders during the day, its current folder is also displayed; however the bidding statistics will be pulled from yesterday's folder. If the keyword has no clicks, the folder 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 folders 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 folders 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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