Auction eCommerce

How Does Bidding Work? An In-Depth Guide to Keyword Bidding in 2024

  |  4 min read
Key Takeaways
  • Keyword bidding is the process of setting a budget for each individual target keyword in a Google Ads campaign. You specify how much you are willing to pay when someone clicks on your ad, which is known as cost-per-click (CPC) bidding.
  • Based on your budget and bid amount, Google Ads determines which ads to show on search engine result pages. Keyword bidding allows you to optimize your bids according to factors like competition, relevancy, and keyword performance in order to drive more leads and conversions.
  • It's important to constantly monitor results in order to make any necessary adjustments in your competition within your ad group.

As a business owner, it is essential to understand how online advertising works in order to make the most of your money and reach your desired audience. Bidding plays an important role in maximizing the success of any online ad campaign, yet many businesses don’t always know exactly how bidding works or why it’s necessary for their marketing efforts.

In this blog post, we'll go into detail about what bidding is and how you can use it strategically to get maximum value from your digital ads. We'll cover everything from setting up bids and choosing the right objective for each campaign timeline, allowing you to gain insight into which targeting strategies work best for your B2C or B2B eCommerce business.


Keyword Bidding + Back-Office Software

Want to integrate keyword bidding with an ERP, CRM, or other software? Clarity can make it happen. Get in touch to find out how.

Ad rank plays a large part in a bids quality score

What Is Keyword Bidding?

This bidding process involves bidding on specific keywords for your ads in search engine marketing (SEM). It is one of the most important pieces of a successful SEM campaign, as it helps you reach potential customers who are performing queries for the products or services you offer.

When creating a keyword list, think about which terms people would use to find your business online when they use search engines. Research competition (those in similar ad groups bidding on the same keyword) and cost per click (CPC) will help you determine how to bid on each keyword effectively.

Optimizing auction bids on multiple keywords simultaneously can ensure that your ads show up in prominent positions when users search for relevant queries.

A good keyword big can increase your quality score.

The Benefits of Keyword Bidding

By utilizing each keyword bid, businesses can benefit in several ways. Here are just a few of the many benefits:

Targeted Reach

Bidding allows you to target specific keywords or phrases that are relevant to your business, ensuring that your ads are seen by the people who are most likely to be interested in your products or services when they check search results.


If you don't win the bid, you don't pay. This means you can use the unused money to bid higher next time or use it for a different advertising method.

Flexibility of Your Maximum Bid Strategy

A keyword bid offers the flexibility to adjust your advertising strategy at any time, ensuring that you are always reaching your target audience in the most effective way and competing effectively against your competition in ad groups in search results.

Measurable Search Queries Results

You can easily track the performance of your ads and make adjustments based on the data. This helps you to continuously improve your advertising strategy and maximize your return on investment (ROI).

Ad and Landing Page Synergy

Ads often point to a landing page that explains what you're company has to offer. This landing page will further guide the person who clicked down your marketing funnel.

Landing pages are often created to guide clickers after user searches.

The Process of Bidding

The process of placing keyword bids and pay-per-click advertising involves several steps:

  1. Keyword Research: The first step is to research the keywords that are relevant to your business and your audience.
  2. Ad Creation: Once you have identified the keywords you want to target, the next step is to create compelling ads that will capture the attention of potential customers.
  3. Bid Amount: After creating your ads, you will need to determine the bid amount for each keyword, which is the highest amount you are willing to pay for each click.
  4. Campaign Launch: Once you have determined your bid amount, you can launch your campaign and start reaching potential customers through search engine results.
  5. Performance Tracking: Finally, it is important to continually monitor the performance of your ads and make adjustments as needed to ensure that you are maximizing your ROI.

Tips for Successful Keyword Bidding

To ensure that your keyword bidding advertising strategy is successful, it is important to follow these tips:

  • Focus on Relevant Keywords: Make sure that you are targeting keywords that are relevant to your business and your target customers.
  • Create Compelling Ads: Your ads should be well-written and visually appealing to capture the attention of potential customers.
  • Monitor Performance: Continuously monitor the performance of your ads and make adjustments as needed to ensure that you are getting the best return on investment.
  • Test and Refine: Regularly test and refine your advertising strategy to ensure that you are always reaching your target customers in the most effective way.
A keyword bid can help you get to the top ad position when bidding on paid ads with negative keywords.

How Much Do Google Ads Cost?

Google AdWords has captured the largest portion of the digital advertising pie in the digital marketing world. The cost of AdWords varies greatly and depends on factors such as the competitiveness of the keyword, your maximum CPC bid, your ad group, the layout and design of your ads (ad quality), and the geography you are targeting.

Understanding Google Ads takes practice. Generally speaking, the more competitive the keyword, the higher the cost. Additionally, Google AdWords charges a fee for each click your ad receives. This means that if you have a higher bid on a particular keyword and your ads are more visible to users, they will likely generate more clicks.

Make the Most of Your Advertising

Finding keyword groups to advertise with is vital to your success, so why not find the absolute best? Making keyword research and ERP connect can help you decide which keywords are perfect for your business.

Clarity wants to help you make the most of all the information available by integrating the necessary software to create the perfect ad campaigns. We offer a no-hassle, complimentary discovery process to introduce you to Clarity Connect, our extensible integration platform.

Our business analysts can help you decide on the tools for your business, so get in touch with us today!

Development of automated bid strategies for better ad rank and quality score.



How does keyword bidding work? A bidding strategy is a set of tactics and strategies used to optimize ad performance in search engine marketing. It involves selecting the right keywords, setting the right bid amount, adjusting bids as needed to maximize ROI, and researching industry trends to stay ahead of the competition.

A successful keyword bidding strategy requires research, analysis, testing, and ongoing optimization to ensure maximum return on investment.


The amount you should bid on a keyword will depend on multiple factors, such as your budget, the amount of competition for that particular search term, and the estimated search volume on search engines. You should look at the current market prices for similar keywords and adjust your bid accordingly.


Ad spend for PPC (Pay-Per-Click) campaigns refers to the amount of money a business allocates to pay for each click on their online advertisements. PPC is an online advertising model where advertisers bid on specific keywords or placements, and they pay a fee each time a user clicks on their ad. This method allows businesses to attract targeted traffic to their website or landing page.

Advertising spend in PPC campaigns is determined by factors like keyword competitiveness, industry, and targeting options. Popular platforms for PPC advertising include Google Ads and Microsoft Advertising. Advertisers set a daily or monthly budget to control their spending.

The effectiveness of a PPC campaign is measured through metrics like Click-Through Rate (CTR), Conversion Rate, and Return on Ad Spend (ROAS). Advertisers aim to optimize their campaigns to achieve a positive return on investment (ROI), where the revenue generated from clicks exceeds the cost of advertising.

Careful keyword selection, compelling ad copy, and well-designed landing pages play crucial roles in the success of a PPC campaign. Regular monitoring, adjustments, and A/B testing are essential to maximize the impact and achieve desired business objectives.

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Stephen Beer is a Content Writer at Clarity Ventures and has written about various tech industries for nearly a decade. He is determined to demystify HIPAA, integration, and eCommerce with easy-to-read, easy-to-understand articles to help businesses make the best decisions.