Choosing a Currency as Payment Option

[nawazshahzad]

Hi Guys

For ages i have out of touch with Google Adwords - to me i stuck on the stage of setting up an account, therefore i have few basic questions with clear answers from you guys as a help!

1)For e.g. if i choose UAE dirahams as a currency to pay Google but we are targeting International Locations, so how i can set a daily budget in $ (dollars) not in dirhams, or at a same time how will i evaluate the keywords cost / bid in Dirahmas = ad position based on it?

I dont know whether google has a currency converter calculator with them to convert cost of the bids in dollars from dirhams after 30 days billing cycle?

2)In choosing CPC or CPM bid do i need to convert dirhams in dollars to judge the exact ad position. Because if i target US or UK then.....what?

If you guys help me in this then it's great!

Cheers
Nawaz

[abbottsys]

I'm no expert on foreign exchange, but it seems to me that if you are on the paying side of the equation, and you have the option to pay in USD, then take it.

The dollar is real low right now, so buying USD with Dirahams in order to pay Google should save you money. Lots of money. But, perhaps Google has figured this out and will close that option.

Let us know what you find. But in general, buying USD with UAE Dirahams is like getting a 30% discount from where things were in 2000. Same goes for most other currencies of course.

Think of it this way. The US is running a 30% off sale on everything (including ad clicks!). Take advantage!

[AussieWebmaster]

lol... whatever currency you set your account in is what you have to pay in and what you set budget limits etc. in

[abbottsys]

Originally Posted by AussieWebmaster

lol... whatever currency you set your account in is what you have to pay in and what you set budget limits etc. in

Of course. And once your set it you cannot change it. So it's an important decision.

The question is this... if you are outside the US, and you are opening a new AdWords account, which is the best currency to pick, your own or USD? i.e. are there any Foreign Exchange benefits to picking USD given the weak dollar. I believe there are big benefits.

[AussieWebmaster]

Whatever one you pick you want to have the conversion in your head of the currency you know so what things are costing will be accurate... not rounded to the oh it is about that much

as a currency move.... I would ride the USD if you are from overseas - it has more drop left in it.

[abbottsys]

Who would have thought that Foreign Exchange strategy is a part of AdWords. Hey, I love this system. In fact, did I ever mention I'm an adwords addict

[AussieWebmaster]

Just another way to arbitrage Google - got to love it

[abbottsys]

Originally Posted by AussieWebmaster

Just another way to arbitrage Google - got to love it

Google AdWords as a FOREX trading system, you gotta love it. The FOREX market is far and way the biggest in the world. So, if you're planning to open a new AdWords account, and you're not in the USA, then consider the option of paying in USD.

My friends in the UK are rushing to the US to buy stuff (ok, fashion and shoes) at "bargain prices". Such is the power of FOREX. But don't forget, it applies to Google ad clicks also. They're on sale, so buy 'em with USD while you can

[thomas68]

Most of the responses here favor a USD currency mainly for the reason that the USD is weak at the moment, and that it may still have some drop left.

I would like to advice to the contrary. I'm also not an expert, but I'm based outside of US and EU, so it's more speaking of my experience.

Conversion Losses
If you select to pay somebody in any other currency but your own, you have got to pay a third party to convert your currency to the target currency. This is normally a bank (if you pay Google using a bank account) or your credit card (if you pay by card). This is to say that everytime you change currency, you lose money. That's why your local bank will have a rate to buy your US currency and another higher rate for you to buy their US currency.

Example A: You priced an ad exactly 1 dirham and you get 1 click. Google will then charge you 1 dirham and you're done. If Larry and Sergey needed money, they will take your 1 dirham to the bank. But the bank will only offer them a lower than published rate because the banks also needed to put food on the table.

Example B: You priced an ad exactly 1 USD and you get 1 click. Google will then charge you 1 USD and when Larry and Sergey needed money, you need to go to the bank and pay more than the published rate, because the bank says that in order to pay Larry and Sergey 1USD they have to charge you slightly more, as they also needed to put food on the table.

Bank Charges
All transmission of money internationally, needed bank charges, even if you pay by credit card. If you pay by card, Visa and Master will normally takes care of the conversion and banks charges and these are nominal. If you pay by bank telegraphic transfers, then you would need to pay a fee. If you select to pay in local currencies, there would be no charges. It would be as if Larry and Sergey drove to your local bank and got their payment, in local currencies.

Currency Fluctuation Risk
Now that the USD is weak, if you buy US products, then you would be happy. When the USD is strong, and if you buy US products, you would be sad. So whether you are happy or sad will depends on whether the USD goes up or down. This is called fluctuation risk. Normally, in international transactions, the buyer will assume the fluctuation risk. For example, if you ordered a porsche, they will charge you in Euro, and since they have worked hard on it, being hand made and all, they want their Euro. They don't care if you local currency goes up or down, when they deliver your car, they want their Euro and you assume all currency fluctuation risk.

Now for the same porsche, if you pay by local currency, you don't care if the Euro or your local currency goes up or down. If you think it's worth 100,000 local currency, and by the time they deliver their car you just pay them what you think the car's worth. They assume all the risk of global currency fluctuation.

Weak US Dollar
Paying in local currency does not mean that you cannot take advantage of the weak US dollar. Say there is a competitor of yours which is based in the US, and both of you bid for the same keyword. He bid 1 USD and you the local equivalent, say 5 dirham. Larry and Sergey must find a way to convert dirham and USD to 1 common denominator, as all things being equalled, they need to have a way to decide who is paying more. I am guessing they are using USD as a common denominator. Since 5 dirham is now worth more than 1 USD due to the weak USD, you will be in position 1 while your US competitor will be in position 2, since you are paying slightly more due to the weak USD.

If needed, you can now set your bid to 4.5 dirham (say 4.5 dirham now equals 1 USD, due to the weak dollar). You will find that you and your US competitor will be paying the same amount, but because of the weaker USD, you will now be able to buy more ads if your daily budget stays the same. This is the same reason people in UK are buying from the US due to the weak dollar.

Payment Options
Contrary to popular beliefs, you can change your prefered currency and it is not a "make decision now and it'll stick forever". You are not allowed to change your time zone, but you are allowed to changed your prefered currency at any time.

I'm paying with local currency and looks forward to interesting discussion in this thread to convince me otherwise.

[AussieWebmaster]

In general you would be right Thomas if you were talking about a specific day and a small amount of currency but Google accounts that are billed have the opportunity to spend in dollars all month as the dollar falls and then pay in dollars from a currency that could have increased by 5% - much less than the cost of converting the money.

[abbottsys]

Originally Posted by thomas68

....but you are allowed to changed your prefered currency at any time....

Thanks for the detailed analysis. Wow! I'll have to ponder this for a while. But it was the above comment that caught my attention. I did not realize this, and the Google docs I read said the opposite. But, you're overseas and speaking from real world experience, so it's good to know it can be changed anytime.

This makes the currency decision less critical. Still, I would love to hear from others overseas as to which decision they make, and why.

It's actually quite a complex foreign exchange problem, and your comment about it also affecting ad rank makes it even more interesting!

[AussieWebmaster]

We spend our money advertising for the forex industry... if we did not take any advantage of the arbitrage it would be wasting the knowledge we have.

Good luck everyone and if you need info on where the various currencies are going month to month try DailyFX.

[thomas68]

AbbotSys,

Changing currencies is not for the faint of hearts. Personally I've not done it as I am under the impression that I am fine with local currencies. You've got to activate another account and import all your stuffs and I double checked on the help files, it's not against the terms of use.

AWB,

Noted your comments but agree only in part. It's valid too for large sums when dealing with conversion losses. But agree that it's easier to manage your campaigns when the USD slides fast.

I would hope that AWR would enlighten us as to how/what Google uses to convert a person who bids 1 AUD versus the equivalent in USD, or any other currency for that matter.

[AussieWebmaster]

I seem to recall that Google does all its pricing in USD and then converts

[thomas68]

Originally Posted by AussieWebmaster

I seem to recall that Google does all its pricing in USD and then converts

Adwords used to display everything in local currency and still charge me USD until recently. Now that I have thought about it, I really wanted to know what Google used and how it's used to convert, especially on my keyword bidding.

a) Which rate does Google uses? Which bank? Buy Rate? Sell Rate? Middle?

b) How does Google convert? Real Time? Monthly Rates?

It may seem that we trust Google more than we should, that they would do the right things. If content ad placement and site exclusion were to be an indication, they deserve must less trust than they are given right now.

[abbottsys]

It's clear this is a complex situation and involves more than just open market foreign exchange conversions, because Google needs to do *internal* conversions for ad ranking before advertisers get billed. These internal conversion are a mystery at the moment, unless there is documentation I've not found. It would be good to get clarity on this aspect of AdWords.

[AussieWebmaster]

From memory I was told they did all price and position calculations based on USD and then converted at current rates - they use Citi rates right now.

[abbottsys]

Originally Posted by thomas68

AbbotSys,

Changing currencies is not for the faint of hearts .... You've got to activate another account and import all your stuffs...

Sure, you can change currency if you're willing to open a new account. But once an account has been opened its currency cannot be changed. Another variable that need clarification is the currency of the credit card you supply, and if it needs to be the same as the account currency.

The number of possibilities could get nasty e.g. consider an advertiser in London, targetting the US, with an AdWords account in Dirhams and paying with a credit card in British Pounds