Yesterday Google announced a the AdWords blog a new bidding option named preferred cost bidding. Google prepped me the day before for my post at Search Engine Land on this feature. Honestly, after the call I was still not 100% clear on the benefits.
What is preferred cost bidding?
You select the average price you'd like to pay per click (a preferred CPC bid) or per thousand impressions (a preferred CPM bid). The AdWords system then automatically works to hit this target price.
For example, if your analysis shows that a click on your keyword-targeted ad is worth US$0.75 to your business, you can set a preferred CPC bid of US$0.75. The AdWords system will then adjust your bid on individual ad impressions to bring your actual average CPC as close to US$0.75 as possible. Your ad may be placed in a range of positions as the system works to give you your preferred cost.
In contrast, the traditional AdWords bidding method lets you set maximum CPC or CPM bids. You specify the most you're willing to pay for each individual click (for keyword-targeted campaigns) or each thousand impressions (for site-targeted campaigns). You may end up paying any amount up to the maximum bid that you specify.
The FAQs can be found at http://adwords.google.com/support/bin/topic.py?topic=10775.
The benefits of preferred cost bidding? I was told this gives advertisers more control over their campaigns, also allowing advertisers to stabilize their costs and save time so they don't have to manually adjust their maximum bids, which saves time.
Reaction to preferred cost bidding: Advertisers are not giving this new bidding option a warm welcoming. The largest discussion on this new feature is at WebmasterWorld where we have several posts that all show a negative reaction to this release. Here are some, but not all, quotes from the thread.
I'm glad they keep adding features because it's so easy to master the simple set of tools they had so far ;)
Sounds like a great way to overspend. I wouldn't touch this one with a 10-foot pole.
I for one would prefer they worked on fixing some of the existing issues.