An Introduction to Analysing your Competitor’s PPC Strategy

Recently one of our clients has seen their CPCs for a usually steady and profitable keyword skyrocket, causing a significant impact on their ROI.

Why? Because a competitor has decided to start bidding very aggressively on that keyword to dominate the top spot of the auction.

It prompted us to start questioning what the right response to this is. Do we match their bids, sacrificing our own profitability for the sake of presence and conversion volume? Do we cut our losses and drop out of the auction, focusing our budget elsewhere?

Below are some of the best ways you can make educated guesses at your competitor’s Google Ads strategy using the available metrics, as well as actually understanding your own performance – as well as ideas of how to react to changes in auction share.

Auction Insights

The first step to working out what your competitors are doing, and how to build your own strategy, is to really understand the metrics you are dealing with.

For example, impression share is not actually the amount of times you appeared compared to your competitors, and average position is not where you showed on the results page.

In case you need a refresh, here’s a recap of the auction insights competitive metrics and what they mean. Below each is how you can use them to assess your competitor’s behaviour, and what you might do to rectify performance.

Impression share

What is it: The percentage of impressions you received compared to the amount you were eligible to receive.

You need to understand what eligibility means here to appreciate impression share. Eligibility in this context is based on:

  1. Current ads’ targeting settings – that is, keywords, languages, audiences, and bid adjustments on device, gender, household income etc.
  2. Approval status – for example, if half your ads are disapproved, all things being equal, if they were then approved, that would double the amount of auctions you are eligible for.
  3. Quality score – you can just have too low a Quality Score to be eligible for an auction. This is a bit of a catch 22, as it’s hard to improve your Quality Score without being in auctions. We’d recommend using a Quality Score tracker on your account to identify which of the component parts of Quality Score you ought to improve initially. Ours for example is free and easy to use.
  4. Bids – bear this in mind, if your bids can be too low for you to be eligible to show. That’s significant because you might think that volume in your market is low, because you’ve got a high impression share but low impressions. In reality, you might be pricing yourself out of the auction in the first place, making the amount of impressions you are eligible for smaller, and overinflating your impression share.

How to analyze your own performance:

Whilst you can see how you have lost impression share (that is, to rank or to budget), you cannot see how your eligibility is determined. Whilst for targeting settings and approval status that is fairly obvious, for quality score and bids it is less so.

I suggest:

  • Cross-referencing the volume you are seeing for a high impression share low volume keyword with that of another high volume keyword with Google Trends information. If you see that the low impression share keyword should have more volume than it’s currently receiving, that is likely an indicator that you are not eligible for a significant number of auctions.
  • Implementing our Quality Score tracker, and cross-referencing your Quality Score over time with your Impression Share. You can’t infer cause from this, but you ought to be able to see correlations in the peaks and troughs between the two metrics, if Quality Score is impacting your Impression Share.
  • Checking whether your high impression share, low volume keywords have limited statuses – particularly, “Rarely shown (low Quality Score)”. This might not actually be a cause for concern (more on this below), but it is helpful for diagnosing low volume with high impression share.
  • If the issue does not look like it’s down to Quality Score, and your settings are definitely correct (targeted language and locations for example), then try raising your bids and monitoring closely.

How to analyze competitor behavior:

There are two main ways in which you should analyse your competitors’ impression share:

  1. If and how it has fluctuated over time
  2. If the fluctuations are having a knock-on effect on your CPCs

One of the best ways to do this is by using the tool you can find at number 19 on my colleague Wes’ post: 162 Adwords Scripts to Supercharge Your PPC Campaigns.

The auction insights tool allows you to graph your’s and the top 5 other auction participants’ impression share over whatever time period the data covers that you’ve downloaded.

Crucially it also lets you plot your CPC also, meaning you can see if there are correlations with CPC changes and your competitors’ impression share – for example, if someone increases their impression share through aggressive bidding, then you may see yours stay stable but your CPCs increase.

A few NBs and best practices for using this tool:

  • If you want to compare YoY for May for example, you need to download data from the 1st of May last year, until the end of May this year. When looking at the graph, if you’ve segmented by month, you need to look at the state of play at the very start and the very end of the graph.
  • When segmenting by time in the interface, if you are looking at a longer time period you’ll be restricted with the lengths of time by which you can segment. However, if you select the “more options” option on the download menu, you can segment more granularly.
  • The graph only shows the top 5 participants over whatever time period you are looking at. That means that if you are looking over a year for example, and there has been an aggressive competitor within the last month, you may either not see them on the graph or their impact might be minimised. We’d recommend doing a shorter term snapshot, as well as a year-on-year.
  • Don’t forget that IS and CPCs can increase and decrease significantly and sharply because of a range of issues, not competitor activity: like adding a high volume broad match keyword for example, or changing targeting settings. So, if you don’t see significant change in your competitor’s impression share but yours drops massively, remember to think if any significant changes happened in the account around that time. The “add note” function is fantastic for dealing with this.

If you see that a competitor’s impression share has increased to your detriment, you can:

  • Look at their top and abs. top page rate (more on this below) before making a decision on how best to handle it.
  • Consider whether it’s linked to different moments in the year, and plan your budgets accordingly. Whilst increases are likely linked to moments that you also try and push in your account, if you see they have particularly low down periods, it could be smart to try and plan special offers or other activity within those to dominate the auction.
  • Isolate which keywords in particular they have increased their presence on, and if there are any they’ve dropped away on (for example, if there are any keywords on which your CPCs have actually gone down). If they are going for market domination on one or two keywords, that will give you an opportunity to maximise on cheaper CPCs on others, or decide to enter the bidding war with them. (Though more on whether it is actually a bidding war later).

Average Position

What is it: Contrary to popular belief, average position does not measure where on the search page you appeared (as was highlighted by Google’s decision to introduce top impression share and abs. top impression share metrics in November 2018).

Average position is indicative of your ad rank in relation to other ads – and as a result, where you appeared on the results page in relation to other ads. For example, an average position of 2 means there was one ad above yours – but both your ad and the other may have been below the organic results.

In order to identify how often you or a competitor is appearing above the organic results, or in the very top position, you need to look at:

Top & Abs. Top of Page Rate

What is it: Top of page rate is how often your ad appeared above the organic results; absolute top is how often your ad appeared above all the other ads, and at the top of the search results page.

This is not the same as top and abs. top impression share, which indicates how often you appeared in each of those positions compared to the number of times you were eligible to appear there.

How to analyse your own performance:

If your top of page rate is 50%, that doesn’t necessarily mean there are twice as many impressions available at the top of the page than you’re currently receiving if you increased your bids.

Your top impression share may already be close to 100%, despite having a lower top of page rate. What’s happening is that there just aren’t that many ads shown above the organic results for auctions for that particular campaign or keyword.

If your abs. top of page rate is high and your impression share overall is low, it likely makes sense to lower your bids as your likely to get more volume at a lower CPC. This is especially true if there is a significant gap between your abs. top level and the next closest competitor.

Before you do that though, bear in mind ad depth. I’d suggest comparing, over time, your top of page rate and abs. top rate. It may be the case that there just aren’t that many ads shown for the particular keywords you’re looking at, and so a drop in CPC may lead to your ads actually falling below the organic results.

How to analyse competitor behavior:

The key here is to look at your competitor’s top and abs. top rate compared to their impression share.

If you see the top rates increasing alongside their impression share, that ought to mean that they are going hard on bids and aiming to dominate the search for whatever keywords you are currently looking at – but also raising their budget alongside it. That is, they are investing more into their paid search.

If you see their abs. top and top of page rate increasing but their overall impression share falling or stagnating, they are likely increasing CPCs because they see value in being present at the top of the results page, but they are not investing more into it. That’s because their budget is not going as far, because of the higher CPCs, and so their impression share is falling as a result.

If their top and abs. top of page rate is on the decline, despite an increase in impression share, the odds are that they were previously limited by budget and are now putting more money behind it – but not likely bidding any higher.

If a competitor is bidding more aggressively and pricing you out of the auction, tactics you could take include:

  • Investigate whether there are other keywords on which your competitors have lowered their presence. It may be that the competitor pricing you out of the auction have focused their resources on that specific keyword or keywords, and their hike in CPCs in hitting everyone else. If there is a dearth of competition being created somewhere else that is still relevant, you might be best off trying to capitalise on that.
  • Look at whether you have any “rarely shown due to poor quality score” keywords that are actually performing quite well. If you get valuable conversions from these, it may be that your competitors aren’t bothering to bid (because the keyword is a bit obscure, or because the CPCs are too high because of the low-Quality Score). If you are being outbid on other keywords, it may be a better idea to focus your attention here. Of course, we’d also advocate looking at where you can improve your Quality Score using our tracker.
  • Consider bidding on that competitors’ terms. I’ve written an in-depth article here about whether this is a legitimate strategy or not, but if you put pressure on them in an area they aren’t expecting it, it might distract their resources from the original keyword or keywords.

Have any other top tips for fending off PPC competitors, or struggling to deal with the issue? Let us know in the comments!

Amy Hawkins
About Amy Hawkins

Amy joined Clicteq in March 2019 as a Paid Search Account Manager. She has a wealth of experience in managing enterprise retail and lead generation paid search accounts including BMW, Hive, Secret Escapes and iRobot.

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