If you’re like me, you can’t afford at the moment to actually absorb a click from everyone who wants to click on your AdWords ad.  So, at some point in the day, you go over your budget and then its no more ads for you.  You can use this unfortunate circumstance to your advantage.  Go to your favorite ad group, check all the keywords, and click Edit Keyword Settings.  Now turn Position Preferences on, and back out to the keyword list screen.  Set your preference to exclude some ad positioning slots, preferably the top ones, and watch your CPC go down.  You’ll probably still run out of money during the day, but you’ll get more clicks for it.

Why does this work?  Well, by default, Google bids to win on your behalf, where winning is defined as “as high a position in the ad rankings as I can accomplish given my maxiumum bid”.  Suppose, for sake of argument, that I’m bidding on a particular keyword with my maximum bid being $.25.  I have competitors at $.20, $.10, and $.08.  By default (and assuming similar CTRs for all ads), Google will give me the top spot and charge me $.21.  If I’m capped at $1/day, that means five clicks and I’m done.  Some days you might get that in two hours.  However, if you either decrease your maximum bid by hand or put your position preference at 2-10 (which forces Google to bid down from your maximum bid until you’re not in the top spot), you’ll get the 2nd spot at $.11.  Allowing you to afford almost twice as many clicks per day.

I’ve been doing this for about 5 days now and I rather like it.  Lots of things are constantly changing in my AdWords account, but I’ve cut my CPC for my top keywords literally by 70%.

Before: my maximum bid was .25, and my average CPC hovered between .21 and .17 depending on the day (I’ve been getting it towards the lower end since Google’s recent quality-score update).   After the quality score update, I noticed that I was averaging position 1.2… and running out of money within 3 hours of my ads turning on (I have a 10%ish CTR for my best targeted ads).  Not good!

After: same .25 bid, about 8% CTR… and I’m paying nine cents each, for about a 2.8 average position.  I’m still getting my budget’s worth of clicks every day, execpt there’s a lot more of them.  My cost per trial download has declined from $.50 to $.30.