After a long hiatus, this week I thought it was about time that I came up with another blog post. Whilst scratching around for ideas, I noticed the perennial debate about automated bid management had sprung up again over on Search Engine Land.
Guest columnist Nic Abramovic posted a rant about automated bidding tools. The article is fairly uninformed and in places insulting, but I suppose he’s entitled to his opinion. Clearly he’s had a bad experience at some point with automated bidding tools.
I don’t know if Nic was taking aim at any tool in particular, but I feel the need to counter a few of his points, at least from an Efficient Frontier perspective. He does bang on about rules-based systems, which are widely acknowledged to be inefficient. However, he doesn’t attack them because of their inefficiency, but rather on perceived short-comings that could affect any system:
“Most rules-based bidding can only accept a limited amount of data (no matter what search marketing agencies may sell you on) – for example: 7 day, 30 day and lifetime “snapshots” of how your keywords are progressing.”
Historical data is essential, and the more the better. Recency techniques allow EF to use it all, while reacting to changes in the keyword market and conversion rates.
“[Agency leaders require] a PhD from a school such as Stanford and anyone who actually knows what they are doing is working at Google and not at a search marketing agency (sorry, a PhD from a state school does not necessarily qualify as “World Class”).”
Fortunately EF’s founder Anil Kamath does have a PhD from Stanford (on top of his MSc). As one of the comments points out, there are many excellent universities, both private and state funded, such as Michigan. That’s good news for EF’s Sid Shah, who got his PhD from there.
“Another area to watch would be when you have different cost-per-acquisitions for different products, campaigns or keywords. If you are selling various products, you might have specific margins and be able to spend up to X amount, depending on the product purchased. Rules-based systems wouldn’t be able to handle this because they are based on CPA targets.”
CPA targets are just one way of running a search campaign. Chasing ROI, margin or net profit means you have to understand that all conversions aren’t equal. Multi-metric optimisation is a basic and we’ve done that at EF since day one.
Fortunately, I wasn’t the only one who found the article odd. Frank Watson at Search Engine Watch also wrote a rebuttal that led to a debate about editorial control with SEL’s founder Danny Sullivan.
Ironically, of course, bid management is not appropriate for everyone. It’s a pity that Nic didn’t provide a more balanced view. It would have made his opinions more credible.
Thankfully, we can always rely on RKG’s George Michie to provide a balanced and sensible discussion. George is one of the best writers when it comes to PPC and I read his blog avidly. The most recent post is the first in a series and I look forward to reading the rest when they are published.
My last point on this topic, for now, is that there is an unwritten assumption in Nic’s article that people can do bid management better than machines. People have their flaws, no matter how experienced and skillful they are. Let people use all their marketing nous and imagination to build great campaigns that sell compelling products and services. But let the algorithms decide the right bids. As ever, PPC management is not black and white, it’s about the combination of human and computer intelligence to find the optimal solution.
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Thanks for your kind words, Jonathan.
I contemplated responding to Nic’s post directly and tackling the inaccuracies point by point, but then decided: “why bother?”
Hopefully the rest of the series will be worth reading, and I hope you’ll join the dialog.
George
Jonathan,
I would think Nick’s post meant to talk more about the hype that PPC software companies/agencies place on the “magic” bid management, as opposed to greater ROI possible from landing page testing, ad copy, and ad group management. I’ve been on several panels where the black box was foisted unceremoniously on attendees– who are there to learn, not hear vendor pitches about why rules-based bidding doesn’t work or why their company is the solution.
As industry practitioners, we should have a code of ethics (perhaps SEMPO will eventually enforce), that eliminates the chest-pounding, letting clients know PPC success requires both smart tool and smart people. As efficient as EF might be– we have used the express product (albeit streamlined)– the test was a failure because of misrepresentation of the capabilities by an overeager salesperson. That is what causes problems, not the software.
Were PPC truly that automatable, you wouldn’t see headcount in agencies grow in direct proportion to client bases. Yet, the allure of proprietary software is a great weapon for sales. That is what I read from Nick’s post.
[…] Over on Searchbeest, Jonathan Beeston of Efficient Frontier fights for the rights of the algorithm in a lively discussion about automated, bid management platforms and whether or not a human can do a better job with SEM/PPC optimization. […]
I’ve always been on the side of the non-automated tool management. I don’t believe that “tools can’t do it better than people”, otherwise we should all be farming.
The problem is that the current PPC Management tools can only look at a limited dataset at the same time, while an experienced human can use multiple data points to make inferences.
Bid management tools can’t infer that the reason one ad does better than the other is because the ad copy doesn’t match that keyword… It can just lower the bids on the keyword – not helpful.
Maybe the site was down for a period of time, gotta remove that data from the engine…
“XYZ leads are higher quality”, not in your system, not gonna make a difference.
On the flip side though is the nightmare of (not) doing manual bid management for 10,000 keywords at a shot.
I’ve opted for using a tool that submits the bid change for review, this way, if I have something that I want to veto, I can, while still getting the information I need.
Hopefully, we will get to a point where bid management tools integrate better with analytics (can anyone say the analytics API?) and BI tools.
Will this start requiring a PHD to develop? Yeah, but I think we already need those… (Ohh, this coming from a college dropout).
@George: Thanks for dropping by.
@Dennis: You’ve read something into the article that I didn’t, but I take your point nevertheless. I’m not sure how you can regulate sales people, but educating the buyers is certainly a good thing. We participate in the UK with organisations such as the IAB and e-consultancy to try to do that. No software is completely automating paid search; as I said in the post it’s the blend of technology and people that produces the results. But to dismiss technology out of hand is short-sighted.
@David: I think tracking beyond a transaction on a web site is an important factor. Offline values such as lead quality (which can be easily quantified) are often a challenge for advertisers to supply, but it can be done and is being done. Equally, periods of missing or incorrect data can be excluded. Any technology will be hampered if you give it poor data.
I just sent this post to a bunch of my friends as I agree with most of what you’re saying here and the way you’ve presented it is awesome.
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