At first glance, bidding on your competitors’ branded terms seems like a no-brainer.
After all, people searching for your competitors by name are more likely to be part of your target market, making your competitors’ search terms a veritable treasure trove of high quality clicks.
But, as any honest adventurer knows, treasure troves are usually guarded.
While bidding on your competitors’ branded terms is tempting, you might end up waking a sleeping dragon—putting you in the middle of a bidding war that you can’t afford to win.
A Costly Lesson
Recently, one of our clients discovered this the hard way. They had been bidding on several competitors’ branded keywords for over a year, but what had at first seemed like a good idea quickly turned sour when the other companies started to retaliate.
As a result, cost-per-click skyrocketed on everyone’s branded terms and soon the client was paying through the nose for their own branded terms, let alone the competition’s terms.
This was where we came in.
On behalf of our client, we reached out to all the warring companies and discussed the situation.
It turned out that my client wasn’t the only one losing out—no one was getting enough conversions from their competition’s branded terms to justify the increased cost-per-click for their own branded terms.
Once this became clear, we negotiated a ceasefire on the client’s behalf. We wouldn’t bid on their branded terms if they would stop bidding on ours.
As a result, the client’s cost per click decreased 86% and cost per conversion fell 93%!
In this case, bidding on competitions’ branded terms turned out to be more trouble than it was worth, which begs the question:
When is bidding on the competition’s terms worth it…and when is it a good way to get burned?
To answer that, here are 3 questions that will help you decide if it’s worth it to try and steal clicks from the competition’s hoard:
1. How Big is the Treasure?
The first thing to consider is how much you stand to gain from your keywords of interest.
Even if the other company doesn’t retaliate at all, you can expect the cost-per-click for their branded terms to be high.
This is because search engines know that somebody searching for “Burger King locations near me” probably isn’t all that interested in an ad for McDonalds.
You can expect your ads to have a much lower Quality Score, in the range of 1/10 or 2/10. As a result, your bids need to be much higher to secure a good ad position.
But, if there are enough clicks to be had, it might be worth it.
Fortunately, it’s fairly easy to use a competitive analysis tool like SpyFu to figure out how big your competitor’s click hoard is.
All you have to do is type in a competitor’s domain, click on PPC Research and then click on Keyword Groups to see the keywords they are bidding on.
Find their branded terms and you can see how much search volume and how many clicks your competitors are getting on those terms.
If a competitor has thousands of searches for their branded terms each month, it may be a good idea to bid on their terms—especially if they get a lot more branded term searches than your company does.
On the other hand, if they get less searches than your company, it’s probably not worth it to try and get in on their action.
2. How Mean is the Dragon?
If your competitor’s click hoard is quite a bit larger than yours, it may be worth raiding. However, you still need to consider whether or not the competition will retaliate and how bad that retaliation will be.
This differs from industry to industry.
If your industry takes a harsh stance on brand encroachment, bidding on the competition can result in a vicious response.
Some industries, like the legal sector, are so defensive of their brand that a misplaced bid could put you not just in the middle of a bidding war, but at risk of a law suit!
On the other hand, in some industries, everyone bids on everyone else’s brand. When competition like this is par for the course, the retaliation is often less severe.
Even in this case, however, you may not want to bid on the competition. Sometimes, a good-natured competitor is the last business you’d want to offend.
For example, if you frequently get referrals from the “competition,” then you’ll have to ask yourself whether bidding on their terms will get you more leads than you’ll lose to a falling out.
In any case, if you can’t afford bad blood between you and the competition, it may be best to just let sleeping dragons lie.
3. Can You Take the Heat?
The last thing to think about is whether or not you can afford to enter a bidding war.
When angry companies start striking back by bidding on your branded terms, your cost-per-click on your own branded terms may increase 2-5x or more.
And, this number will grow with every additional company you “go to war” with.
Whether this is a big deal or not depends entirely on how many clicks your branded term ads are getting. Once again, this boils down to how big and well-known your brand is.
If you’re an industry leader and get a lot of your leads from your branded terms, then increasing the CPC on your branded clicks could be devastating.
If you’re the little guy, however, and nobody searches for you, then a few expensive clicks might not break the bank.
Hiding From the Dragon
Now, all this talk of retaliation and bidding wars may have you wondering, “Isn’t there a way to just avoid it all that? Can’t I hack AdWords or something so my competitors can’t tell what I’m doing?”
Yes, it would be nice to have one’s cake and eat it too, now wouldn’t it?
Fortunately, there are a few ways to keep your branded term bidding out of sight.
One of these is to exclude the zip codes of your competitors’ businesses from your targeting. That way, when people at your competitor’s business search for their own terms, they won’t see your ads.
Another option is to exclude your competitors’ IP addresses, so that your ads won’t show up for searches from competitors’ computers.
Of course, if your competitor has a lot of locations or IP addresses, it may be difficult to keep your ads hidden for long.
The safest bet is to assume that if you bid on your competitors’ keywords, they will eventually start bidding on yours. If you feel like you can’t take that heat, it’s best to stay out of the oven.
When it comes to bidding on the competition, you may be playing with fire. Sure, you might walk away with a treasure trove of clicks, but you also might end up getting burned.
In general, if you’re a little guy hoping to steal from a big dragon who expects you to do it anyway, the rewards may be worth the risks.
However, in other situations, you may want to be more cautious.
If you’re already in a bidding war and are finding that your britches are a little more scorched than you’re comfortable with, consider reaching out to your competitors and calling for a ceasefire. Chances are, they’ll be just as anxious as you to call things off.
Do you like to bid on your competitor’s branded terms? Is it worth the money and risk?
This guest post comes from the SpyFu community. Jacob is passionate entrepreneur on a mission to help businesses achieve online marketing success. As the Founder & CEO of Disruptive Advertising, Jacob has created an award-winning, world-class organization that has helped hundreds of businesses grow using pay-per-click advertising and conversion rate optimization.