Source: Search Engine Roundtable by barry@rustybrick.com (Barry Schwartz). Read the original article
TL;DR Summary of Understanding CPC Bidding in Microsoft Advertising
Microsoft Advertising bids can exceed your set max CPC due to multiple bid adjustments. The effective cost per click (eCPC) is calculated by multiplying your base bid by various adjustment factors like device and audience. For example, a $1 base bid with 15% desktop and 25% audience adjustments results in a final eCPC of about $1.44. This explains why your actual CPC may be higher than the configured max bid.
Optimixed’s Overview: How Bid Adjustments Influence Your Microsoft Advertising CPC
Understanding the Mechanics of Effective CPC in Microsoft Ads
Microsoft Advertising uses a dynamic bidding system where your maximum cost per click (CPC) can be modified by several bid adjustments based on targeting criteria. This means the final amount you pay per click, called the effective CPC (eCPC), may be higher than your initially set max CPC bid.
How Are Bid Adjustments Applied?
- Base Bid: This is the max CPC you set, for example, $1.00.
- Bid Adjustments: These are percentage increases or decreases applied based on factors such as device type (e.g., desktop) or audience segments.
- Calculation: The eCPC is calculated by multiplying the base bid by each bid adjustment factor. For instance, a 15% desktop adjustment (1.15 multiplier) and a 25% audience adjustment (1.25 multiplier) are combined as 1.00 × 1.15 × 1.25 = $1.44.
Why This Matters for Advertisers
Understanding that the final CPC can be higher helps advertisers better anticipate campaign costs and optimize bids effectively. It also clarifies common questions about why clicks sometimes cost more than the max CPC set in Microsoft Advertising.
