Dayparting: Profitable Tactic Or Waste Of Time?

Hour of day bidding, or dayparting, has been the topic of much discussion of late. Advertisers want to leverage every possible trend to maximize their profits, and one way to do this is to take advantage of search engines providing advertisers with the flexibility to run their campaigns with bidding by hour of day. With such flexibility in bidding, it is natural to assume that hour of day bidding would be a big advantage. However, a careful analysis of the data shows that this is not the case for most advertisers. To illustrate, here’s a chart of hour of day revenue per click for the query “car hire:”

Revenue Per Click

Looks like pretty compelling evidence that hour of day bidding is worthwhile. But now look at the chart below. It shows a campaign’s average revenue per click vs. the hour of day. It is clearly evident that the revenue per click shoots up by 80% in the early hours of the morning and then stabilizes in the working hours before falling off late at night. However, look at the click volume. It is very low in the early hours of the morning before picking up in the early hours. At 6 AM when the revenue per click (RPC) is very high, we get only 0.5% of the daily clicks.

Click Volume

Let us assume that by some sophisticated math, I figured out the right increase in bid at 6 AM and it increased my profit by 50%. The net increase in profit for the whole day would only be 0.5%*1.5=0.75%. Of course, this makes the assumption that I know the right bid. This is itself a difficult thing to do. Without sophisticated modeling it would be hard to understand the connection between bid, click and RPC for a given hour. Further, even if I could do the modeling, I most certainly could not do a good job modeling this for a tail keyword since they receive a few clicks a day, with most hours seeing zero clicks.

After looking at many hour of day datasets, I have come to the conclusion that hour of day bidding is not a big win for most advertisers. The wins at best are small, 0-1%. Further, given the sparsity of data, hour of day bidding strategies can only be used on head terms and the strategy will be heuristic at best. An example would be increase bids by 10% in this hour due to 10% better revenue per click.

For most businesses, hour of day bidding will at best give you a small incremental gain. In any case, it is best to look at all of your data, cost and revenue on a per click as well as aggregate basis before making any dayparting decisions.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: Analytics | Search & Analytics

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About The Author: is Director, Business Analytics at Adobe. He leads a global team that manages the performance of over $2 BN dollars of ad spend on search, social and display media at Adobe.

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  • artarmani

    I would have to disagree with the article just a little as it can be misunderstood by some advertisers reading this. The above article comes across to me as analyzing the effectiveness of dayparting in relation to profitability of an online campaign. In the model used above, I would assume that this would be for an e commerce site, however I am not sure everyone, especially beginner advertisers, would understand that you are talking about an e commerce model. maybe that just needs to be clarified in the article to correct my misunderstanding?

    What about campaigns that are not e commerce driven such as local service oriented businesses such as plumbers, electricians, contractors, landscapers, lawyers, day care centers, dentists etc?

    The number of local service oriented businesses using paid search is growing at astronomical levels and most of these businesses measure the effectiveness of a campaign by volume of phone calls or walk-in traffic and not e commerce. In the instance of a business that is looking to generate phone calls, they are better off utilizing the ability to daypart.

    An advertiser in the service industry model would be more likely to receive stronger results by paying for traffic around the times of day a person is most likely to call and more importantly when there will be someone on the other end to answer the call.

    On almost every campaign I run that is a service type model, dayparting has been crucial to the success of the campaign.

  • http://www.linkedin.com/in/peterthulson pthulson

    Interesting article. This has been a topic we’ve discussed with the team I work with.
    I’m new to PPC strategy and there’s a related question I’ve been exploring:

    Is there any validity to the strategy of consistently bidding low with the goal of letting other budgets run out and picking up clicks late in the day?

    I’ve heard this strategy tossed around, but logically, it seems to obvious for it to actually work. Thoughts?

  • http://www.connectedadvertising.com steveahaar

    This is a very broad statement, to say for “most companies.” The choice of “Car Hire” as demonstrable proof that day parting does not work is far too narrow and specialized. Seeing category analysis would be more representative. Television, Clothing, pants / shirts, auto repair, phone service, moving, etc. EF has enough data to make this more applicable. Jumping from a phrase to a multi-categorical assertion is huge.

    Part of the reason I bring this up, is that I have seen good analysts guide SEM programs to great profitability increases by using day parting. The industries were telecom and auto; and we were talking about healthy increases in profitability.

    Siddharth is quite correct that it requires good analytics to do this right. But, before it is dismissed out of hand, there are a few preliminary views that only require rudimentary math:
    Do CPC’s vary during the day?
    Do form / call conversion vary during the day?
    Does the CTR vary? (signaling general intent fluctuations)

    If these are stable, the it is probably not worth taking it to the next step. If they are not, at least have a consultant run the day part analysis.(if there are no in-house resources)

    Beyond the SEM metrics, are product returns significant? I have seen this metric very based on time of day the product was ordered. It may be worth a consultants fee.

    pthulson: depends on the program. In some cases, conversions vary by positioning. What you save in budget, you lose in lost conversion.(effective RPC drops and you lose your advantage) In other case, conversion may be stable or increase ( I have seen studies showing position 6 converting like #1). As with all things SEM, you need to test into it. :)

  • http://www.efrontier.com sidshah

    I would like to make a few comments:
    1. I have investigated at 10-15 verticals and in all cases so far I have not seen a big win. Usually when the Rev per click is high, the volume is low.

    2. In a few cases, I have seen some marginal gains and it is when the market is less sophisticated .Some Markets in the UK and Asia are cases where day parting might help. What happens is that advertisers ask Google to show ads until the budgets run out (instead of rotate evenly) and when they drop out of the market, cpcs drop. Other cases are when you might have an offline transaction as part of the funnel and your office is closed. But thats an obvious case and thats why I havent talked about it in the article.

    3. When people talk about big win, how big a win are we talking about. Like I showed, even with a 50% gain in profitability for an hour you wouldnt gain muchwhen traffic is small.

    pthulson: I can make some recommendations if you want to analyze day parting:
    1. Collect at least 2 months of data. That will give you about 60 data points per hour so you can make some statistical conclusion.
    2. Plot CPC by hour. if you find CPC steadily decreasing by hour it means other advertisers are dropping out of the market as their budgets run out. You might have some opportunity there.
    3. Plot revenue per click by hour. If you find a potential spike or dip you have some opportunity to benefit. But you have to look at traffic volume. If the volume is small you might not get much. Typically the RPCs in the wee hours of the morning is great but the traffic volume is tiny.
    4.Even if you day part, you need to figure out your bidding strategy. Like I said in the article, it is not a simple thing to do. You could try the tools Google provides (Example: Increase bids by 20% between 7 and 9 PM etc). Focus on the head.

    Make sure the strategy is focused on achievement and not activity !

  • http://www.linkedin.com/in/peterthulson pthulson

    steveahaar: That’s an interesting point on how positioning affects RPC. I’ll definitely pay closer attention to that relationship and adjust bidding strategy accordingly.

    sidshah: Appreciate you recommendations. I’m just beginning to dive into our PPC efforts. Knowing which metrics are the most important and relevant is a challenge for me, so getting specific recommendations from helps greatly.

 

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