This article originally ran on ClickZ.com on March 27, 2009. It remains current because too few PPC search advertisers employ the correct balance of human and non-human intelligence required to get the most out of PPC search campaigns.
If you don’t use some level of automated technology to manage your bids, you may be missing huge opportunities and generating waste in your campaign. Even the engines have started to provide controls that can be used as some form of bid management. The set-it-and-forget-it (for even as much as a day or two) method of managing bids is fine if you have really deep pockets and care nothing about marginal profit. Likewise, that approaches works if you can afford to set your bid price significantly above your current billed CPC just in case a competitor goes after your current positions and visibility.
Otherwise, bid management can be the key to a double-digit efficiency gain.
Automated bid management isn’t a panacea. Used wrongly, such systems can easily drive your campaign into budget-wasting territory. Bid management technology is only as good as its programmer/designer and the human operator at its controls.
A winning search campaign must have two brains to maximize the paid search opportunity: the human brain and the algorithmic brain, and they must work in tandem. Failure of either one can have a negative effect on your campaign. So today, I’ll discuss the characteristics of both the human and algorithmic brain that are conducive to creating a well-balanced campaign.
Search’s First Brain: You
I’m amazed by how many marketers continue to manage search with a spreadsheet and pivot table. And those spreadsheet jockeys seem advanced in comparison to marketers using far less sophisticated tactics. My business partner just had a $1-million-per-month spender tell him that his “special strategy” is to be number one on every keyword. I’m sure Google, Yahoo, and Microsoft are very pleased they have advertisers for whom position is the objective, not the means to deliver scale at acceptable profit levels!
There’s a shortage of talented staff in the search marketing industry, so it’s no wonder the majority of time and attention is paid on the tactics and strategies and the teams that plan evaluate and execute those strategies. The human team — “brains” and expertise — are critical factors in the continued success and growth of your campaign and the wrong team can derail or seriously impede the progress of your campaign.
Inside Search’s Second Brain
A search campaign’s second brain is the logic within the bidding algorithm. You or your people must understand the variables that go into a well-orchestrated search campaign and, more important, how to prioritize the endless list of tasks suggested through data analysis, analytics, and general best practices. Unfortunately, many campaign-optimization tasks are still labor-intensive, even when aided by automation. For example, while keyword research has become a relative breeze compared to the way it was in 1999, when tools were sparse and inaccurate due to small data sets and poor data sources, the labor has shifted to the process of integrating and testing keywords in a campaign. Regardless of whether keywords are tested in individual silos or in groups, there’s labor involved in orchestrating the tests.
I’ve found that when prioritizing human-run activities, it’s best to factor in the predicted or expected return should the test be successful. This means doing the tests that, if successful, will yield the biggest positive impact on the campaign. There’s also value in having humans analyze data, even if a highly sophisticated bidding algorithm does the heavy lifting.
This brings me to the importance of knowing the intrinsic concepts, formulas, theories, philosophies, and factors that go into your bidding system’s algorithm. You’d be amazed by the number of marketers who simply look for a cool buzzword when shopping for an automated bidding tool or SEM (define) agency but who (perhaps due to math phobias) never dig deeper into the all-important system managing millions of their marketing dollars in real time, making choices among opportunities, and allocating each dollar both within and across engines.
What to Look for in Search’s Second Brain
Regardless of whether a marketer prefers a simple or complex portfolio model or a more nuanced data-driven segmentation model, the bidding engine should have two characteristics. It should have the capability to be set up to be predictive (some call this a learning algorithm). The algorithm must also be reactive. Reactivity is akin to the program trading software on Wall Street that reacts to a change in the financial ecosystem.
Reactivity can be important in many ways. For example, a marketer bidding on the keyword “Janet Jackson” several years ago would have seen her conversion rate (and potentially her Quality Score) drop precipitously as the makeup of search intent changed during the infamous wardrobe malfunction episode. The same can happen to any company, based on the flow of news items or changes in search behavior. Being able to react in real time provides a hedge against these kinds of unexpected changes, even though historical data might indicate that conversion rates will continue to be good. Only a reactive system is capable of shutting the campaign down until an operator is able to investigate the cause. Other causes triggering such a shutdown might involve an e-commerce merchant’s online store that unexpectedly runs out of inventory.
If you don’t know much about the mechanical brain managing your search dollars, it’s time to use your organic brain to learn about the decisions it’s making with your money.