AdWords advertising works through simple keywords bidding process. AdWords bids can vary depending on the competitiveness of particular keywords or how popular they are with active searchers.
Advertisers need to determine first the actual AdWords bids for their target keywords before they start their campaign. In this way, they will know how to position their bids and get the most value from their AdWords advertising.
A basic rule to follow when bidding for keywords in AdWords is the higher keywords are ranked in search positions the minimum AdWords bids would be lower. That’s because popular keywords could magnetize lots of traffic and click through which on the aggregate could increase the cost of AdWords campaign.
Conversely, those keywords ranking lower in search and usage popularity would have higher AdWords minimum bids. This is because these keywords are often highly targeted and will have sure conversions after a successful click through. These keywords also target those search engine traffic that are ready to buy a product. Thus, actual sales would be higher but the AdWords bids would also be higher.
Depending on the type of campaign and budget of advertisers, it is usually not advisable to bid for general search terms and popular keywords. Although these keywords can generate massive traffic to websites, they could also result to disproportionate balance on click through and conversions.
It is always best for advertisers, with limited budget and wants immediate conversions, to bid on keywords on the fourth or fifth position. These could be less popular but they are usually the higher converting keywords which could promise actual online sales.