Why The Google Grants $2 Bid Maximum Increase Might Be Bad

Last week I wrote a post defending the Google Grants $1 keyword bid maximum from criticism. Ironically, shortly after I published it Google announced they were increasing the bid limit to $2.00. Here is what they officially said:

First, as of January 28, 2013, Google Grantees may bid up to $2.00 USD on keywords

Second, to balance the interests of businesses who pay to advertise on Google search, your ads will now appear below the ads of traditional AdWords advertisers

The impact this will have on Google Grants recipients is complex and depends on how the changes are actually implemented. As of yet there is some ambiguity regarding what it means to appear below the ads of traditional AdWords advertisers. I suspect that overall it will negatively impact grantees, and here are some of my predictions.
 

Inflation In CPC

 
Bidding for keywords uses an auction-based system, and so you always have to consider bids not at their face value, but in relation to competing advertisers. As a nonprofit Google Grants recipient, your competitors will usually be other grantees. If every grantee changes their bids from $1.00 to $2.00, your bid in relation to your competitors stays the same and therefore not improve your ad position. The net effect is that your CPC or cost-per-click has inflated.
 

Lower Traffic For Top Performers

 
Inflated CPC will hurt the top performing grant accounts that are able to reach the $10,000 limit every month. To give a crude example for demonstration purposes, if your actual CPC is $1.00, then you can get 10,000 clicks in a month. If your actual CPC inflates to $2.00, you’re only getting 5,000 clicks in a month. Your overall traffic has dramatically decreased.
 
That being said, if you’re not even close to reaching $10,000 ad spend in a month, then this won’t be an issue for you. Your costs will go up, but you have ad spend to spare.
 

Potentially Lower Average Position

 
This point is a little ambiguous based on what Google has said. If paid keywords automatically gain better ad position than all grant keywords, grantees won’t be able to compete with paid keywords and will have lower positions.
 
However, some people have interpreted the change as grantees not being able to capture the top 1-3 spots on the page, causing their ads to appear lower than paid ones. If that’s the case, your ad position may actually increase on keywords that compete with paid accounts. To demonstrate with an example, if the first page bid CPC was $1.50, all else being equal you could not land on the first page with a $1.00 max bid. However, if you now have a $2.00 maximum, you could land on the first page even though you won’t get a top spot there. Overall your position has increased.
 

Refocusing Of Campaigns

 
In the worst case scenario that the changes make it impossible to compete with paid keywords, it may cause a refocusing of your campaigns. You would have to target keywords that paid advertisers are unlikely to use, namely ones that are more cause-based. For example, “cancer awareness” is a cause-based keyword that a for-profit company probably wouldn’t use because it wouldn’t provide ROI.
 

More Charities Paying For AdWords

 
With greater priority being given to paid AdWords, we may see more charities transition to running both grant and paid accounts. High value keywords to a charity may be bought at cheap prices if a paid $0.05 bid will show higher than a grantees $2.00 bid. This will favor bigger charities that can afford to purchase AdWords, and make it more difficult for the smaller ones to compete.
 

Final Thoughts

 
The changes only happened recently and we haven’t heard much from Google in terms of clarification. This is just my first impressions. As more details become clear of what exactly the changes mean, we’ll update you on the impact to Google Grants.
 

What are your thoughts on the changes to the Google Grants program?

 

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  • Maudern

    “As a nonprofit Google Grants recipient, your competitors will usually be other grantees” This is not at all the case with my clients, and I am already seeing our visibility disappear. What a blow for accounts where we’ve spent months, even years, to grow quality scores so we can compete with paying customers. This topples several accounts and renders our business model and the case studies we’ve used to attract new customers all but dead, frankly. That grant funds do not have equal value to traditional funds is very upsetting and seems to undermine the essence of the program.

    • SimonChoy

      Quite unfortunate I agree. What kind of drop in clicks and ad position have you seen so far?

      • Madern

        So far I’ve seen steady clicks and higher costs. I am seeing ads at the top of the SERP in second and third position, which is surprising and heartening. The account I’m most worried about seems to still say “under review” which must be part of the transition (other accounts read this way yesterday) so I’m anxious to know what will occur there. They compete with commercial businesses almost exclusively, and I don’t have high hopes.