Category: bid management

Automated Bid Management: The Debate Continues…

After a long hiatus, this week I thought it was about time that I came up with another blog post. Whilst scratching around for ideas, I noticed the perennial debate about automated bid management had sprung up again over on Search Engine Land.

Guest columnist Nic Abramovic posted a rant about automated bidding tools. The article is fairly uninformed and in places insulting, but I suppose he’s entitled to his opinion. Clearly he’s had a bad experience at some point with automated bidding tools.

I don’t know if Nic was taking aim at any tool in particular, but I feel the need to counter a few of his points, at least from an Efficient Frontier perspective. He does bang on about rules-based systems, which are widely acknowledged to be inefficient. However, he doesn’t attack them because of their inefficiency, but rather on perceived short-comings that could affect any system:

“Most rules-based bidding can only accept a limited amount of data (no matter what search marketing agencies may sell you on) – for example: 7 day, 30 day and lifetime “snapshots” of how your keywords are progressing.”
Historical data is essential, and the more the better. Recency techniques allow EF to use it all, while reacting to changes in the keyword market and conversion rates.

“[Agency leaders require] a PhD from a school such as Stanford and anyone who actually knows what they are doing is working at Google and not at a search marketing agency (sorry, a PhD from a state school does not necessarily qualify as “World Class”).”
Fortunately EF’s founder Anil Kamath does have a PhD from Stanford (on top of his MSc). As one of the comments points out, there are many excellent universities, both private and state funded, such as Michigan. That’s good news for EF’s Sid Shah, who got his PhD from there.

“Another area to watch would be when you have different cost-per-acquisitions for different products, campaigns or keywords. If you are selling various products, you might have specific margins and be able to spend up to X amount, depending on the product purchased. Rules-based systems wouldn’t be able to handle this because they are based on CPA targets.”
CPA targets are just one way of running a search campaign. Chasing ROI, margin or net profit means you have to understand that all conversions aren’t equal. Multi-metric optimisation is a basic and we’ve done that at EF since day one.

Fortunately, I wasn’t the only one who found the article odd. Frank Watson at Search Engine Watch also wrote a rebuttal that led to a debate about editorial control with SEL’s founder Danny Sullivan.

Ironically, of course, bid management is not appropriate for everyone. It’s a pity that Nic didn’t provide a more balanced view. It would have made his opinions more credible.

Thankfully, we can always rely on RKG’s George Michie to provide a balanced and sensible discussion. George is one of the best writers when it comes to PPC and I read his blog avidly. The most recent post is the first in a series and I look forward to reading the rest when they are published.

My last point on this topic, for now, is that there is an unwritten assumption in Nic’s article that people can do bid management better than machines. People have their flaws, no matter how experienced and skillful they are. Let people use all their marketing nous and imagination to build great campaigns that sell compelling products and services. But let the algorithms decide the right bids. As ever, PPC management is not black and white, it’s about the combination of human and computer intelligence to find the optimal solution.

Google’s Conversion Optimiser

Google have just released the Conversion Optimiser, a simple tool to autobid campaigns to a CPA target. I think this is Google's first step into true, closed loop bid management; by that I mean bidding to an ROI target, rather than a position (see Position Preference), cost (see Preferred Cost Bidding) or to maximise traffic (see the Budget Optimiser).

If you run a small campaign with a simple objective, then the Conversion Optimiser is probably worth a go. Particularly if running an AdWords account is only a small part of what you do and of course, like most of Google's tools, it's free. However, if you run a big campaign with complex objectives then let me offer a few reasons why you should think twice before you try it out.

  1. You have to use Google's tracking and by doing so you're letting Google know exactly what their traffic is worth to you. That helps them price it accordingly!
  2. CPA targets work at an adgroup level, not a campaign level, which restricts volume of acquisitions. You still need to manually calculate different CPAs for different adgroups to maximise your volume. This is not a trivial problem to solve.
  3. Google's conversion tracking doesn't allow advertisers to weight multiple conversion metrics. So if you have one thing for which you'll pay a £10 CPA, and another which is £20, it can't balance off between those demands.
  4. It's CPA only; it won't work if you optimise to another strategy, such as ROI, net margin, profit etc.
  5. It's only as accurate as Google's calculations. Anyone who uses Google's traffic estimator knows that the numbers can be wildly off, which is why at Efficient Frontier we build our own traffic estimation models for every client.
  6. It doesn't work on Yahoo or MSN.

Netimperative Search Marketing roundtable

I attended a Netimperative Search Marketing roundtable last week to discuss bid management and the future role of agencies in search. It was a good debate but though we started on topic, we roamed through the full spectrum of digital media leaving no pixel unturned.

There seemed to be a sense that as Yahoo was moving to the opaque Panama platform, bid management software was on its death bed. And for traditional, rules-based management systems I agree. They’ve been dying a slow death ever since Google’s market position became so dominant. However, that doesn’t mean technology can’t be applied to manage and optimise bids on opaque marketplaces. It just has to be a whole lot more sophisticated.

There’s a write up and a recording of the session here.

Insight into how portfolio bid management works

A few weeks ago I got embroiled in a debate at PPC Blog about the future of bid management. The kind of mathematics involved in portfolio optimisation is very complex. Many people find it incredible what can be done through the statistical analysis of campaign data and are quick to dismiss it as impossible. Fortunately Efficient Frontier’s founder, Dr Anil Kamath, gives a great insight into the maths and technology in an interview by Eric Ange of Stone Temple Consulting.

Eric also nicely sums up the technology in action with the search campaign of Travelzoo. This was also featured in a recent edition of Direct Magazine.

Internet World

I spent part of last week at Internet World, a three day event at Earls Court Exhibition Centre. More accurately it was at ‘Earls Court 2′, a name entirely without imagination. Surely ‘Earls Court: The Reckoning’ or ‘Earls Court Strikes Back’ would have given it a bit more umph. Anyway, it is a vast indoor arena that was stuffed full of every kind of online technology and marketing company that you could imagine.

Although I’m not a big fan of exhibitions, they are a good chance to catch up with old colleagues and business partners, and to get a measure of what the digerati are thinking. I also contributed to a panel on search on Thursday morning, together with Amanda Davie (i-level), Hedley Aylott (Summit Media) and Jonty Kelt (DoubleClick).

I picked up on that advertisers and agencies are still struggling to manage large, complex search campaigns. One person remarked that search required the most work of all the media they planned, and was the least profitable. Another expressed dissatisfaction with the tool he was currently using, questioning what it really did to make his team efficient and effective. Both of these comments came from agencies.

Paid search management still has a long way to go.