As a Google Adwords Qualified Individual I understand the complexities in efficient and cost effective bid management, but I’m certain the relatively simple Google interface and powerful Google tools give many new-to-adwords users a false sense of understanding when they try self-manage their Adwords accounts.

As with anything complex involving $$$, you can lose your shirt pretty quickly (ask the mortgage guys!) when you only *think* you know what you’re doing. For the experts who manage bid management accounts day in and day out, it really is easier to show positive ROI on SEM spend when you understand the math *and* have the tools to apply it.

Ted said: “it’s highly competitive, a little sneaky, and who knows, once in a long while, maybe it will make an ever so slight difference.”

One of the reasons all of the major search engines base each ad’s CPC on the next-lower ad’s bid (i.e., a ‘second price’ auction) is that, in this sort of system, honest bidding is a dominant strategy. That is, to bid more than a click is worth to you wastes money, while bidding less sacrifices conversions. This is true regardless of the bid of the ads in positions above or below yours.

So, what Ted says is about bidding a few cents above your assessed value of that keyword is true – “maybe it will make an ever so slight difference” – but unfortunately that ‘slight difference’ is most likely to be in the wrong direction for your bottom line.