From 3rd Party To 1st Party: The Evolution Of The Google Advertising Toolset

A year ago, I was firmly anti-Google. Not in the sense that I disliked Google — I just felt that Google did not provide the best tools in the business to analyze and make decisions on their own advertising placements.

When asked if an advertiser should consider a 3rd party technology to help manage ad spend, I would undoubtedly say “yes” because Google Analytics, AdWords, and Merchant Center were (and remain) imperfectly bound systems requiring a lot of proprietary work to merge and make informed decisions.

Much has changed in the last year. Google has made some significant changes (PLA, rules-based and improved algorithmic bidding, attribution modeling, enhanced campaigns…), making it increasingly difficult to leverage third party tools to gain an advantage over free tools like AdWords and Google Analytics. Having been on the inside at a technology house and heavily involved in marketing third party technologies, this is a difficult reality to embrace.

I’m going to go through the historical pros and present realities of 3rd party paid search technology platforms versus their free ad server counterparts (AdWords, Bing Ads, and Google Analytics). For the record, I have no personal bias toward or against particular technologies and all statements below are generalized toward the entire industry.

Tracking

One of the most blatant shortcomings in the Google tracking ecosystem has always been conversion tracking — AdWords conversion events and Analytics goals/e-commerce tracking.

AdWords Tracking Setup

AdWords Tracking Setup

The inability to create composite tracking events, parse conversions event types for bidding, or modify conversion data after the fact can be frustrating if you depend on AdWords or Google Analytics as the only means of tracking conversions for your marketing program.

Google Analytics Goal Setup

Google Analytics Goal Setup

Third-party providers have stepped in to provide comprehensive and flexible tracking systems with deep integration capabilities. But, while it sounds nice in a pitch, complex tracking integrations are only relevant if you have complex tracking demands. Some businesses require complex tracking solutions such as composite metrics or latent conversion attribution; however, the reality is that most advertisers have simple advertising tracking demands – either a CPA (cost-per-acquisition) or ROI (return-on-investment).

AdWords, Bing Ads and GA all do a very good job with CPA and ROI. And, with a little legwork and a half-decent internal database, most tracking needs can be distilled down to a CPA: the average net present value of a conversion.

 

CPA Calculation

Bidding

Building on the relevance of simple tracking demands, at face value, AdWords offers a fairly similar tool set compared to even the most flexible 3rd party platforms:

  • AdWords
    • Manual CPC Bidding
    • Rules based bidding
    • Algorithmic rank based bidding
    • Algorithmic CPA based bidding
  • 3rd Party Software
    • Manual CPC Bidding
    • Rules based bidding
    • Algorithmic rank based bidding
    • Algorithmic CPA based bidding
    • Algorithmic ROI based bidding

Without any additional analysis, the only way to manage to a performance metric in AdWords that’s not CPA is via rules — an option that has been around for years and refined via 3rd party tools, but only a recent addition for AdWords.

As previously mentioned, any revenue-based metric can be distilled down to a CPA, and as the ad server, Google has a massive advantage over any other algorithmic bid management provider.

Consider the number of variables a 3rd party system can leverage for bidding in AdWords: in the enhanced campaign environment there are 2 bids per keyword (Computer/Tablet & Mobile). If the platform is robust, it may offer up to 8 day-parts, making 16 possible bids per day per keyword.

On the other hand, AdWords conversion optimizer can manipulate bids for all three devices, across both Google.com and search partner networks per unique impression. That’s several orders of magnitude of variance in possible bids per day!

The most common argument against conversion optimizer is that it’s a black box – but so are 3rd party platform algorithms. The inherent advantage of the ad server is too much to ignore.

Large Accounts

Prior to Enhanced campaigns, marketers had a clear incentive to segment campaigns by as many values as possible to best understand unique click and conversion behaviors by device, network, etc. Take a comprehensive account with 50 campaigns and break it apart by three devices (computer, tablet, mobile) and three operating systems (windows, mac/iOS and others), and you’ve got a 450-campaign behemoth that’s borderline unmanageable due to size constraints.

Accounts that get too big become extraordinarily difficult to manage and manipulate as even the simplest tasks require mind-numbing repetition leading to human error.

As a result, 3rd party platforms are built around automated processes and scripted bulk changes evolved to bear the burden of repetition.

For better or for worse, Enhanced Campaigns force marketers to reduce that load back down to, in my previous example, 50 campaigns – effectively negating the benefits provided by the 3rd party tool sets designed to streamline bulk processes.

Bing

With all this talk about AdWords, we can’t forget about Bing Ads. A fleshed out Bing Ads account can make up 15-25% of overall volume in a paid search effort, so it’s nothing to scoff at. While Bing Ads lacks the same feature-rich design of AdWords, it does offer a very capable on- and offline editor. With a little elbow grease and offline analysis, AdWords bidding practices can be incorporated into Bing Ads.

With no proprietary bidding technology, we cannot rely on an algorithmic conversion optimizer to set bids for us in Bing. Fortunately, the very same tool we use to identify goal CPAs can be modified to calculate goal CPCs.

Consider the following known formulas:

  • CPA = Cost / Conversion
  • CPC = Cost / Click
  • Conversion = Conv Rate x Clicks

Doing some quick substitution:

  • CPA = Cost / (Clicks x Conv Rate)
  • CPA x Clicks x Conv Rate = Cost
  • Cost / Clicks = CPA x Conv Rate
  • CPC = CPA x Conv Rate

So, we can take calculated goal CPA (net present value AOV) multiplied by conversion rate to identify a goal CPC at a keyword level.

CPC & CPC calculation

Concluding Thoughts

Third-party software solutions exist to fill in the gaps where proprietary software falls short. For many years now, tools like Marin Software, Kenshoo, Adobe Omniture, and countless others have delivered enterprise-level tool sets designed to make up for shortcomings in the AdWords and Google Analytics tracking and management systems.

But, with the bevy of recent updates and changes, these platforms are struggling to maintain the edge that has made the search technology industry relevant. Keeping up with AdWords/GA has become the primary objective. Google is laying down the challenge to yet another industry: add value or move on.

 

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

Related Topics: Channel: Analytics | Google: AdWords | Google: Analytics | Microsoft: Bing Ads | Search & Analytics

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About The Author: is the Vice President of Performance Marketing and Analytics at SellPoints and is based in the San Francisco Bay Area.

Connect with the author via: Email | Twitter | LinkedIn



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  • http://www.rimmkaufman.com/ George Michie

    Hi Benny,

    I agree that the self-service tools have improved a great deal. As an agency with proprietary software we’d take issue with a few points you make: First, you list algorithmic bidding (to different types goals) as though this was a “check box,” and that all algorithmic solutions are equivalent. That’s pretty far from the truth. Those of us who’ve put time and energy into algo development know that there are sophisticated algorithms that produce lousy results and sophisticated algorithms that produce great results. A good marketing scientist will keep testing new ways to improve on the system and find that improvements can be made that matter. We think some folks may have checked the “sophisticated algorithm” box and walked away, but the best in the industry have not done so. Second, I’d make the case that any enterprise program needs to be thinking about ROI in more sophisticated ways than the face value of what happens at checkout. For smaller online pure plays, I agree, the benefits of sophistication may not be worth the price; but I think it will be a long time before enterprise advertisers hand over the reins to Google to set their bids for them.

  • http://www.facebook.com/david.rekuc David Rekuc

    George, I very much agree with your points about the “sophisticated algorithm” being more than a yes or no. Additionally, I think we glanced over some important data that isn’t native to adwords.

    Here’s a list of things adwords has trouble automating:

    ROI (for initial transaction)

    ROI (using customer value metrics like estimated CLV, 12 month value, etc)

    CPA, when working with conversions that are sales leads (aka CPA in adwords is really CPL)

    Incorporating customer acquisition metrics (new customers vs. returning)

    Overall good points about 1st party tools closing the gap, especially making features more available to SMBs at a more attractive price tag. It does make it more difficult for custom tools to prove their worth, a serious wheat from the chaff situation.

  • http://www.rimmkaufman.com/ George Michie

    Agree completely. Add in customer types, return rates, lead valuations, multiple success metrics (email signups, store locator visits, catalog requests, driving directions clicks on a mobile device), etc and the sophisticated solution becomes more and more valuable. A 10 or 20% better solution may not be worth the price tag if you’re spending $5K/month, but the math makes more sense as you apply that difference to a larger and larger spend.

  • http://www.LeadDiscovery.com/ Jerry Nordstrom

    Great article Benny. I could not agree with you more when you said “complex tracking integrations are only relevant if you have complex tracking demands” We come across advanced strategies, amazing technology, software and overall solutions, but most are irrelevant to a very large set of advertisers.

  • Thomas Kane

    I have started using Marin for PPC management, so far, it seems to be worthless unless I need to manage across platforms of Bing/Facebopok etc.. all we need it for is Google.

    Seems like the auto bid rules & new attributes Google has along with ecommerce in analytics setup, Marin is pretty useless, and the software support is just hired kids who are booksmart with no real advertising experience.

    Anyone have any similar experiences or comments?

  • http://twitter.com/JBGuru Jeremy J Brown

    AdWords is still far behind the times when it comes to Attribution and other elements. Even with their recent change moving Search Funnels data into the grid, AdWords is still using a Last-Click attribution model that undervalues top-of-funnel non-brand terms and overvalues last-click brand terms.

    That’s just one area where Google lags behind 3rd-party offerings. Further, many of these changes by Google are a result of them playing catch-up with 3rd party tools. Google is not driving all innovation, but instead is responding to innovation by 3rd party tools.

    Lastly, Google has stated they want to keep the AdWords interface and system easy enough for most advertisers to use (including very small, unsophisticated spenders). That’s clearly at odds with offering a more sophisticated platform to cater to advanced needs.

    I agree that Google has gotten closer to advanced 3rd party tools, but it’s still quite a ways away.

  • http://twitter.com/bennyblum Benny Blum

    George & David – it appears that you guys are not considering my suggestion for how CPA
    bidding can be as accurate if not more so than ROI bidding if
    CPA is calculated as net present value (LTV – Returns) / conversions. As I mention, this cannot be done in GA or AdWords and requires an internal system that can measure LTV (or another platform).

    Your point about multiple conversion events highlights my statement “complex tracking integrations are only relevant if you have complex tracking demands”. Some advertisers need this and that’s why there will always be a marketplace for third party bid tools.

    Lastly, to your point about bidding algorithms, I am not discounting all algorithms as not being good nor am I making the presumption that all are equal. I am making the point that as the ad server, Google has always had an inherent advantage over third party bidding providers as only Google can consider user intent at the impression level. Moreover, in the enhanced campaign environment, AdWords has greatly reduced the number of bid properties 3rd party bidding engines can manipulate. Despite not all third party algos being equal, all must operate within the confines of the API.

  • http://twitter.com/DelvePartners Delve Partners

    I feel like the unspoken message is ’3rd party SEM technology is dead’ but most agencies will continue to use it to crank out nice reports in Excel?

    From one outmoded technology to the next?

    best,

    Jeff

  • http://twitter.com/JadonTechnology jadon_technology

    nice article,found good

  • http://www.swydo.com/ jeroen maljers

    Hi Benny,

    Thanks for this article. Bid management in Adwords, Automated rules, Bulk edits and last but not least Scripts in Adwords have indeed gave us numerous possibilities to manage campaigns natively in Adwords. I think the only achilles heel is attribution, ROAS and the fact that you put all you eggs in one basket.

    regards, Jeroen, Swydo

 

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