I have written about Bid Management many times, and am a big fan of what it can do to help scale a PPC campaign. However, a bad bid management system can trap or limit your campaign.
Portfolio based bid management is a must. Basically, what this is, is a method for dealing with individual keywords that do not present enough data to determine their ROI on an individual basis. The classic cases are long tail keywords, such as one that has a single click, but it resulted in a conversion, or another keyword that has 10 clicks but no conversions.
Making sweeping bid price decisions based on such a small amount of data is fundamentally foolhardy. Smart bid management tools will aggregate data in larger groups. One way to do this is to take all the keywords in an ad group, and then treat them as one statistical entity and calculate their bids based on their performance as a group. If that does not work, the next step is to look at the campaign level.
But this is just the beginning of the issues you face. Here are some others:
- You may have keywords that you bid on for branding purposes, so ROI be damned, you are going to bid aggressively on them anyway.
- Other keywords may exist that you want to measure on an ROI basis, unless they fall below a certain position, in which case, you are willing to sacrifice ROI.
- Some bid management tools don’t allow you to manage to ROAS (or ROI), but force you to work to a CPA goal. Go for all the accuracy you can my friend, and ROAS/ROI is a far superior approach to CPA.
- Attribution is another huge problem. If you have multiple clicks made by a user to the site, which visit do you allocate the revenue to? First? Last? Allocated across all clicks? If you figure this out, what do you do when display ads and email campaigns deliver some of the clicks prior to a transaction. This is a problem that analytics and bid management vendors are just beginning to cope with.
- I have searched high and low for a bid management application that uses trial and error testing to determine when the ROI goal is being met. I have yet to find one. But if you can’t get this, you really don;t have the control you need when setting ROAS.
This industry is in its infancy, and the needs of sophisticated PPC marketers are met best by some of the better bid management applications out there, such as Marin Software, and Efficient Frontier. But, boy to we have a long way to go.
For web marketers, the key is to pick the tool that most closely meets their biggest needs. Making this determination is far from an easy task. What is needed is an analysis of the marketers online business, the dynamics of its marketplace, and an assessment of which tools best meets its needs.