Flywheel's bidding algorithm calculates the optimal bid by constantly evaluating advertising performance. Anytime a change is detected, your new bid will be automatically published in Seller/Vendor Central.
What is the Value Bid?
Keyword and ad group bids in the value bid flow are determined based on changes in your advertising performance, such as conversion rate, net revenue, and the user controlled input, MACS, which communicates your willingness to spend to the bidder.
At a high level, bids are calculated using this equation:
(payoff/price) x (conversion rate) x (MACS) = Value Based Bid
What factors govern bid changes on keywords and ad groups?
Willingness to Spend > Changes made to MACS:
- Increase in MACS = higher bids: Bidder performs more aggressively
- Decrease in MACS = lower bids: Bidder performs more conservatively
Changes in Conversion Rate:
- Increased: If the conversion rate (from clicks to orders) goes up, then we will raise the bid to take advantage of it.
- Decreased: If the conversion rate goes down, then we will lower the bid. This is because we have to buy a lot more clicks, with the same amount of money, to get a sale.
Changes in Estimated Net Ad Revenue > Changes in Product Price:
- Increased: If revenue per order increases (a price increase or the average number of units per order increased), bids will be increased.
- Decreased: If revenue decreases (reduced price, lightning deal), bids will be decreased because the potential payoff (ROI) is lower. For example, if your price was originally $15, a MACS set at 10% indicates you're willing to spend up to $1.50 on a click, reducing the price to $10, now indicates you're willing to only spend $1.00 per click.
How do you know if a keyword/ad group is in the value bid flow?
Review the bid change history to see where a keyword falls in the journey. If you see 'transitioning to value bid' or 'adjusted estimate of click value', these are signs bids are being adjusted in the value bid flow.
Next: Learn about the Bid Change Reasons