Under Pressure To Adopt A Bid Management Solution? Just Say No.

In a large organization there is always pressure to automate certain functions. Can people spend less time on mundane tasks or remove them from human hands all together? Often, organizations take for granted that automation is always better in terms of accuracy and efficiency. There’s plenty of room for automation in search engine marketing, but don’t be tempted by bid management. For almost all organizations, good old fashioned people (armed with Excel) are still the best bid management solution.

The benefits of implementing an automated bid management solution are unlikely to be large, but the costs for bid management services are still substantial. Typical bid management solution pricing is a fixed fee and/or percent of paid search spend, which is a substantial cost for any organization that has a large enough paid search account to consider bid management services.

Will a bid management solution drive several thousand dollars of incremental performance or time savings each month? The search engine marketing manager will still need to monitor and tweak the bid management, so the human time savings is arguably small. And, if a vendor is being paid based on percent of search spend, are they really incentivized to bring overspending down? It is never comfortable when vendor and client goals are misaligned.

Efficiency vs. Quality Score

If an in-house paid search program is already in the hands of a competent search engine marketer, it is likely that optimal bids are being determined to a fairly efficient degree. The main benefit of a bid management system is in increasing the frequency of bid changes. In a fairly stable, yet competitive bidding environment, the benefits of increasing frequency are modest. What would be the incremental cost saved or revenue gained from changing a bid earlier than the in-house search marketing manager would have?

Even in a more volatile environment where there are many active bidders jockeying for position, Quality Score can be a more significant factor in determining position than bid and is (currently) something that bid management systems offer almost no help in improving. Increasing  resources to improve Quality Score is likely a far better investment than bid management.

Besides likely failing the basic cost-benefit analysis, bid management solutions are often overly simplistic for many organizations. Many bid management solutions rely on setting a cost per acquisition or transaction goal to optimize bids, but rarely does a business have a universal revenue per transaction goal. Most businesses sell a variety of products at different price points and bids should reflect the actual revenue (or margin revenue) being driven by paid search marketing. Even better would be the ability to set a goal to maximize profit, revenue (or margin revenue) minus the search engine marketing expense. Using an average CPA or other contrived metric for bid management undermines the efficiency gains bid management is supposed to provide.

Reasoning for seasonality

Additionally, bid management systems are, by nature, reactive and not proactive. Many in-house marketers work in seasonal industries, where recent past data is not always a good indicator of future performance. A florist knows that bids need to be higher in the days up to Valentine’s Day, though the last two weeks of January likely showed dismal pay-per-click campaign performance. Search engine marketers in travel and retail have well defined high seasons where proactively setting higher or lower bids can lead to incremental performance gains as the season kicks off or slows down.

Bid management systems are always behind these seasonal trends as they wait for enough data to inform the bidding decision. Sometimes a human’s industry knowledge and experience is a distinct bidding advantage. Often in these situations, manual bid adjustments are entered to override the automated bidding, which negates the time savings benefit of bid management.

The temptation for a busy in-house search engine marketer to adopt an automated bid management solution, especially under management pressure, can be great. But no in-house marketer does their company any favors by ignoring the true cost-benefit analysis of implementing a bid management solution. For most in-house search marketers, bid management technology needs to advance in sophistication before real benefits can be truly realized.

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

Related Topics: Channel: Search Marketing | In House Search Marketing

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About The Author: is the Vice President, Marketing at Viator,the leading provider of destination activities worldwide, and also blogs on in-house search engine marketing issues at inhousesem.com.

Connect with the author via: Email | Twitter | Google+ | LinkedIn



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  • Andrew Goodman

    After reading Frank Watson’s reaction to this one, I’m struggling to summarize my main complaint with this article, other than the fact that it rehashes ground covered already elsewhere in greater depth.

    On the whole, I’ve been a skeptic of much of the bid management software industry – but to reject it out of hand seems a mistake.

    I think maybe the primary distinguishing factor here is: at what point can you afford not to look forward to various forms of automation which will increase productivity and accuracy in this complex (or when not complex, large) arena?

    If you’re in-house, you can afford to weigh this if you work on smaller budgets and have the account parameters and trends pretty much mastered manually.

    If you’re in an agency with an array of client challenges, today you have to be thinking about not only basic forms of SEM automation, but you need to be looking ahead to more exotic varieties. For example, in complex conversion environments (non-retail, longer cycle, offline, variability in order size etc.), bid rules invoked (semi-manually) account-wide based on integrated response data (eg. custom analytics segments), not just dumb fixed CPA’s, anyone? Depending on the account challenge there are many forms of automation that are going to get the job done better. These challenges can’t be identified by the software, however, so experienced analysts and engaged marketers are a must!

    Now if you’re in-house and working on massive accounts, I also can’t see how you can continue to defend going 100% manual. I agree there is some cost-benefit, but continuing to explore which vendors can provide clean, powerful solutions at a cost that doesn’t eat too much into the profit margin makes sense. If I had worked at Hotwire, I don’t think I’d be defending the “anti-automation” stance quite as vigorously. What I would do would be to figure out why many current vendors offer such a bad deal and such a negative experience, and figure out whether there are any that meet my criteria for flexibility and ROI.

  • Nate Sandford

    The summary of what you’re saying is that an experienced SEM is better than a bid management system. What you are failing to address is the value of that experienced SEM PLUS the bid management software.

    1. The human time savings is arguably small – Anyone who is managing a truly great search engine account does (or should be doing) all of the following things regularly: comparing each keyword on each engine to find discrepancies & opportunities in position & conversion rates, comparing match-types of the same keyword, comparing match-types of all keywords, comparing search networks to content networks, comparing landing page results, making changes to each of the engine’s ads to make sure the best ad is displaying, testing messaging by demographics/keywords/time of day/day of week, and the list goes on. There are dozens (and probably thousands) of analyses that on a macro level give you more opportunity to increase conversion rate & your overall profitability & ROI than sitting in a spreadsheet and doing bid management.
    2. Bid management solutions are often overly simplistic for many organizations – What are you doing as an SEM from a bid management standpoint that is more complex than a computer can complete? Correct me if I’m wrong, but when you are bid managing you are creating a “rule”. That rule is either something like “our conversion rate times our target cost/action is our target cost per click” or “this keyword is a branding keyword and should always be in position 1-3”. Even the most rudimentary bid management solutions can accomplish either one of these faster than any SEM, and without the risk of fat-fingering in excel and accidentally setting a bid to $20 instead of $2 (come on, you know you’ve done it!). I’m not arguing that goal KPIs should be set using more than a simplistic cost/action, but I do not believe that every bid you change takes into account the entire marketplace and external factors and since you can only SEE a simplistic cost/action, your bidding rules are set from that regardless of the bigger picture.
    3. Quality Score can be a more significant factor in determining position than bid – you are making the argument that Bid Management software is imperative! I fundamentally don’t agree with saying that SEMs should focus on QS instead of bids, but that’s not why I’m addressing this. QS is a function of your CTR, keyword-ad combo, landing page relevance, and the overall bidding landscape. If you’re saying this is more important than bidding, you are making the argument that Bid Management software is imperative! Focusing on all those factors of quality score is extremely time consuming, often leading to thousands of adgroups with unique ad text & landing pages. If that is indeed more important than bidding, the human should be focusing on this non-automatable task while the machines do the grunt work.
    4. Even better would be the ability to set a goal to maximize profit, revenue (or margin revenue) minus the search engine marketing expense – If your experience with bid management software is only with companies that cannot do this, you are using the wrong companies. Over the years I’ve used at least 10 different bid management systems that have this ability, and in fact can’t remember one that doesn’t have it.
    5. Many in-house marketers work in seasonal industries, where recent past data is not always a good indicator of future performance – Again you’re assuming that this system is going to be turned on in a closet somewhere and left completely alone. In seasonal industries Bid Management software is even more crucial. Let me use your valentines day example. As an SEM if you know “that bids need to be higher in the days up to Valentine’s Day,” and you are not using any software to assist you, then you have to decide what percentage you’re raising your bids, then manually download each account, change the bids, and then re-upload them, a task taking hours (or worse yet doing them in the engine interface). An SEM armed with an effective bid management system can tell the system “increase all bids by this percentage, but still monitor my conversion metrics. Send me an email every day of the keywords that have become unprofitable since this boost was put in place, and manage them to this higher allowable CPA”. This takes approximately 20 seconds, and then allows the SEM to go update all their ad text in anticipation of the valentines day sale they have coming up, shoot an email to the developers to add a logo matching the new call to action in the ad to the landing page, build out a new content campaign targeting sites that send E-cards with some new text ads that read “send flowers, ecards are for geeks”, and a million other things that are way more valuable than spending hours manually updating bids (especially on Adcenter!).

    I don’t work for a bid management company nor do I care if you use one or not, but I would pit the best SEM in the world against a mediocre SEM using an advanced bid management system and feel very confident that the ROI would be higher even including the bid management fees (especially considering that I paid a lower salary to the mediocre SEM!)

    If you need some names of Bid Management providers from this decade I’d be happy to provide some. I don’t miss doing bid management one bit, and my accounts have never been more profitable.

 

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