What is the maximum bid you would pay for a pay per click such as google adwords?

IMHO, anything over $1 would make it harder for the advertiser to achieve a decent ROI. (Specially true with low-cost webhosts)

OK, I'm showing my age now, but as someone with 20+ years in marketing, I've learned you need to "run the numbers" to determine this, and it varies depending on several things...

I'm sorry that I don't have direct experience with the hosting biz, but for another client who sells faucets, here's what we found. (However, feel free to make your best substitutions for hosting, or anything else for that matter.)

By analyzing our site logs for visitors from search engine referral pages, we found that it took approximately 30 referred visitors to end up with 1 sale.

For faucets, we're pretty much making a one-shot sale, and our average sale price was $90 with a gross profit margin of 20%. This means we have $18 to cover all our non-product expenses like salaries, overhead, etc... plus any marketing costs.

We looked at what some of the broadest keywords were going for (ie "faucets" "kitchen faucets" etc), and knew that the competitors who were bidding on these hadn't "run the numbers" because many were paying upwards of $1.50 per click. Multiply that by 30 clicks to get one sale with a gross profit of only $18, and they were losing money big time.

Since hosting has recurring revenue, you'll have to factor that in and mutiply by the average life of a customer, but hopefully this will give you a starting point.

-Allen