Optimal Bidding Strategy For Enterprise Using Google Keyword Advertising

With the rapid development and widespread of Internet technology, web information is increasing massively, and search engines have become more and more important. By means of search engines, keyword advertisement helps enterprises to find potential customers, promote and sale their products, and gain profits eventually. Many enterprises take keyword advertisement as an important e-commerce marketing tool, and it has become one of the most important forms of search engine marketing.Two problems remain unsolved when enterprises use Google Adwords to promote their products:Firstly, because of the strong dynamic feature of PPC in keyword advertisement, ad position changes all the time. Enterprises find it difficult to control ad expenditure and effect, as well as to get accurate statistical results of ad cost and revenue, leading to unable to make valid judgment on keyword advertisement performance.Secondly, ad positions are limited, but every enterprise hopes their ads are displayed in a prominent spot. Therefore, the competition for front positions is fierce, and the cost is relatively high. Since Small Medium Enterprises (SME) have limited budgets, they can not invest too much on Adwords. How to make rational strategies to improve Adwords efficiency is a big issue.According to the features of keyword advertisement marketing and PPC rules of Google Adwords, this paper studies keyword advertisement base on micro-economic and game theory. Through a micro-economical analysis on keyword advertisement marketing, we indentify the cost and revenue measurement of keyword advertisement and provide an important foundation for enterprise macro-economical policies. We also build up a game theory model, which provides a practical strategy based on Nash equilibrium with estimating information of competitors and information in record such as historical keyword prices, click rates, and etc. It resolves the difficulties enterprises are facing when running keyword advertisement, and gives suggestions on how to improve ad performance.