To do this, we consider the competitor’s budget as the direct method, then we consider our budget by the same method and multiply by our real budget.
Your real budget is $10,000. The direct method showed your budget of $5,000, which means that the direct method is understood by half. If a competitor’s direct method showed a budget of $3,000, then his real budget is about twice as much.
Thus, we get rid of the systematic error of the direct method. However, you should not do this if you have drastically changed the budget for search advertising over the past year.
In the direct method, we use the CPC that we received from Google. It does not depend on the position taken by the ads. But the fact that your ads and competitor’s ads may occupy different positions and they may have different CPCs.
The most interesting thing is that click-through rate (CTR) does not directly affect the cost. If the positions remain the same, an increase in CTR will reduce CPC, but it will also increase the number of clicks and, as a result, the expense will remain the same.
– Andrey Belousov, Growth Hacker