Written By Reprise Media | June 8, 2006 | Share This |

chan life after death bid management.jpg

For those that haven’t heard, Yahoo’s moving to a quality-based bidding system similar in nature to other ranking systems like Google’s and MSN’s, and yet we haven’t heard too many people in the industry wondering what the future looks like for bid management technology companies. Having been exposed to a number of these vendors over the course of the last few years, I’m relatively certain that I’m not the only one who’s been candidly told by a rep that their solution actually “doesn’t work that well for Google”. And for the most part, it’s true. Don’t get me wrong, bid managers work pretty well when it comes to bid-based ranking systems where the competitive landscape is entirely visible and the marketplace transparent. For the last few years, these technologies have been able to effectively place our clients’ ads within the most efficient bid ranges, based off of bid gap and jamming rules. But if Yahoo is arguably becoming more like Google and these technologies don’t really work for Google, doesn’t that mean that these technologies will no longer work?

Yes and no.

The rulegroups that exist today are not going to apply to the search engines of tomorrow. The most effective rules that we’ve used are the ones that rely on finding efficiencies in the market. These “set it and forget it” rules make it so that we don’t have to log into an interface every 20 minutes and manually look for CPC efficiencies because an uneducated competitor thinks it makes sense to bid $25 for position 1 while everyone else is paying less than a buck. To date, the technology has done an outstanding job of taking care of this for us, but those rules have now run their course. Sure, there are a whole suite of performance-based rules, and those are great a few months after a campaign has collected enough data. But in the meantime, would you trust your bidding (and client money) to be handled by a set of rules that aren’t applicable to the system that they’re applied to? Probably not. That’s not to say that quality-based bidding can’t be managed by a technology at all, it just means that the rules need to be redesigned to be effective for those systems. In fact, any returns-based successes that SEMs have within quality-based bidding are due in large part to bid management, albeit manual bid management most of the time. And whether we realize it or not, when we’re adjusting bids on Google we’re applying rules to those keywords both during the data collection stage and especially when we’ve garnered enough backend data to make educated decisions about our CPC’s. It’s just that there’s no technology that currently offers these rules in their product suite.

The difference in managing campaigns between these two ad ranking systems is that the efficiencies we seek are reliant on completely different variables. Rather than determining bids based off of what competitors are paying in an open market, our view on quality-based bidding aggregates the competitors as “the market” and the way we manipulate our bids takes place in a relatively closed system, since our only visibility to that market is based off our own campaign variables like average position, clickthrough rate and fluctuations in average CPC. It’s just our campaign against everyone else, not our campaign against positions 1, 3 and 4. What ultimately determines how to set our bids gets dictated by the return we get on the click prices we pay, with no visibility into what anyone else is doing, proving that even in this “black box”, we can profitably bid manage on behalf of our clients.

As long as the automated rule groups can accommodate the way that we look at quality-based bids and retool themselves to act upon the data the way that we do, they’ll be in no danger of going out of business. When that happens, performance will be a given no matter who you partner with and it will be the human element, the employees of the organization, that become the differentiating factor between SEMs. It will become a marketplace where campaign performance will be a given, and it will be a matter of the type of data we provide our clients and how we make that data actionable that will set one SEM apart from another; critical insight that goes beyond an ROI or a CPx, and insight that can’t be automated. We’ll have more time to spend on deeper analysis of user behavior, more time to implement well-informed creative tests, more time to delve into competitive and vertical landscapes, more time to examine and report on multiple facets of campaign data, more time to provide better service to our clients.

Just as important, we’ll have more time to innovate on the way we do business and bring the industry to the next level. Gone will be the days of clients asking whether or not we use bid managers. Of course we do, human or automated, any SEM worth a grain of salt is bid managing all their campaigns. Instead, the determining factors for SEM selection will be focused on the quality of a broader software platform (i.e., not just bid management), intellectual capital and level of service - basically, the actual skill set of the account team. Campaign architecture and the way data’s reported through that structure, data segments that really identify who the target customer group is, seasonal trend analysis, the list goes on and on. Everything that we already do but could be doing more of right now, and everything a piece of software can’t. Darwinism will take over and it will only be the thought leaders and the innovators that will exist in this new world of quality-based bidding, and after doing a quick tally of my colleagues here at Reprise, every single one of us can’t wait for that day to come.

John Chan is Associate Director of Media at Reprise Media.

Topics: Featured Item, SEM: Bid Management |