Bidding on competitor’s brand names is quite common in many industries. If done correctly, it can result in a fast performance improvement and get you a valuable share of your competitor’s traffic. It is more or less accepted from Google’s side as long as you follow their ad policies and don’t include trademarked terms in your ad creatives. On the flip side, it can cause serious damage in the long run and should be well considered before starting. In this article I’ll evaluate the pros and cons and help you to find out if this is a suitable strategy for you.

Reasons to bid on your competitor’s keywords

The most obvious reason for bidding on your competitor’s keywords, product names or URLs is to get more traffic and search volume. This is useful especially for accounts that have been running stale for a while and are searching for new opportunities to expand. If you’ve already reached the peak on your own branded and product-related keywords, bidding on your competitors’ keywords opens another way to get more traffic and target people who are interested in the product you’re selling.

Smaller and younger brands will find this strategy particularly useful to increase brand awareness as they can reach customers which are interested in the product they offer, but are simply not aware of them. Showing up in searches for a competitor throws your hat in the ring, making you more visible to potential new clients. Furthermore, a user who searches specifically for another company’s name or product usually knows what he/she wants and is ready to buy. If you’re offering the same product and show up in the search results as well, there is a realistic chance to be considered by the user.

Bigger businesses with larger budgets often bid on competitor’s terms as an aggressive tactic to take market share, believing that the higher costs and potential waste of money is worth the potential competitive advantage.

The last reason why it could be a good idea to bid on competitor’s terms is that branded keywords are usually much more cost-efficient than general ones. An extreme example is the keyword “lawyers” which had an average CPC of $109.21 on Bing. Bidding instead, or additionally, on other law firms by name would definitely be much cheaper.

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Why it’s a bad idea to bid on your competitor’s terms

On the other hand, bidding on competitor keywords can be risky. The idea of a lower CPC and potentially more traffic might look promising, but once the other party realises that you’re bidding on their name, they will do the same in return. Long term, this will result in destroying the initially low CPC and increase the overall cost, not only for clicks but eventually also your cost-per-conversions.

One of the most important rules in writing ad copy is to make sure it’s relevant. That means including your keyword and making sure you provide a good landing page experience. As you might imagine, using your competitor’s brand and product names doesn’t exactly make your ad copy relevant to you, and Google will most likely punish you with a low quality score and ad rank due that poor relevancy. To overcome this, you need to once again raise your bids, lest you land in a worst case scenario with a very poor quality score of 1 or 2 and nothing to compensate for it. Logic follows then that it’s also quite hard to reach a high impression share with such a low quality score.

Finally, if you are the first one in your industry to start using this strategy, you might start a never ending war. There are stories of companies which have had to agree on a cease-fire, but this is quite rare. Trust is not exactly a reliable asset in a competitive economy, so once the mutual bidding has started, it’s unlikely to ever stop again.

How to decide if this strategy is for you

In the end, there’s no simple answer to whether or not bidding on your competitors terms is a good idea. However, there are some questions you should ask yourself first:

  1. Can you expect an increase in CPC in the long run? Consider the size of your market and your competitor’s presence in PPC.
  2. Does the value justify the high cost, i.e. can you afford a potential increase in CPA and still be profitable with your campaigns?
  3. Is the search volume of your competitor’s keywords large enough and worth the risk? Competitive analysis tools like iSpionage might help to answer this question.
  4. Is it common practice in your industry to bid on competitor’s terms? Some industries have an unspoken “gentleman’s agreement” to not do so, so you don’t want to be the first one to break the cycle! Simply try it out using your own brand name as well as your competitor’s names and see who shows up in the search results.
  5. Do you know who you are really competing against in an online auction? The biggest waste of money is to accidentally bid on another company’s’ brand name who is actually not a direct competitor.

Smart AdWords Strategies | Reef Digital Agency

Bidding on your competitor’s brand names and products is a double-edged sword and the success is dependent on many variables. It can provide a significant performance boost, but also dramatically increases your cost and reduces your revenue. To evaluate the most effective strategy for your business, get in touch with the Reef team.

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