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.
Sign up for weekly recaps of the ever-changing search marketing landscape.