Automating PPC Bid Management

By jameszol
Published on May 6, 2008

Warning: This is an informative, somewhat educational rant that is mostly against the ppc bid management software commonly used today. :)

Automating bid management is one of the biggest priorities for us when we build a new account or take over an existing account. If we can automate bid management, then we can focus on the creative stuff like ad copy, keyword organization, website/landing page optimization, etc. Automating bid management can be tedious at first – then we develop a good pattern that works very well for each account because it is almost always customized and tailored to that specific business.

How do we automate bid management?

First, we run several reports – typically an ad group report, campaign report, keyword report, and an advertisement report.

Second, we manually review and annotate each report to see what kind of bid management style we think will be the best to start with – sometimes we switch gears after a few weeks if we see a negative trend with our current technique. Things we are looking for in the reports: average position, click through rate, conversion rate, costs (click and conversion), impressions, conversion volume and click volume.

Finally, we either outsource bid management to a trusted piece of external software that we feel matches the supposed management style we adopt for that account, we manage it manually (a pain, but worth it most of the time) or we use in-house technology that is still in beta/development.

What kind of ‘bid management’ styles are there?

These are two primary (in my opinion) styles of bid management – one I don’t like but use occasionally while the other is our preferred method and it is quite comprehensive:

1. Directional – This bid style acts and reacts to a single key performance indicator – cost per click, cost per action, or some other indicator. The bid is increased or decreased based on the indicator. For example, if the campaign/ad group/keyword CPA is $25 and your daily or weekly CPA was $28 then your bids will decrease to meet the $25 CPA goal. The opposite will happen if your daily or weekly CPA is $22 and your goal is $25 – bids should increase to bring your real CPA closer to your goal. A lot of software adopts this model because it is the easiest to mathematically compute.

Problems with Directional bidding – other factors are ignored when one indicator is chosen. A good example is when you are focused on CPA, you need to account for the fact that a certain position – given everything else – is going to be your sweet spot for a time in terms of volume. If that volume is not meeting your CPA goal, then lowering your bid might affect your positioning and it could kill your volume and therefore your costs could skyrocket in which case you would continue lowering your bid; or, raising your bid might affect positioning while volume might stay the same but those same actions could cost two or three times what they did in that ’sweet spot’. I guess the easiest way to define the problem with this style is the fact that there is more to the picture than meets the eye when you are focusing on one indicator for changing a bid.

Benefits of Directional bidding – Testing. Starting out with the directional method of bid management will give you a better picture of the cause and effect of one indicator against another. Not only will you understand your audience, ads, landing pages, etc a little better…but you will also find some low lying fruit in a different position or you will find a keyword that gets fantastic results when you focus on one indicator while another keyword achieves great results if you focus on a different indicator.

Some might argue that all bid management is directional – and I understand. My use of the word is simply defined by one indicator…while one should always consider other indicators, using one ’simplifies’ the automatic bid management process in a lot of the ppc bid management software available today.

2. Quality - This bid management style acts and reacts to the quality score levels of a keyword, advertisement, and landing page. I like to think that quality bid management is the ultimate bid management style that is fleeting the grasp of ppc bid management software that’s out there today. One reason it is fleeting software companies is because there are two sides to quality bid management – ad platform quality and business determined quality.

Ad Platform Quality – is the visible quality score you get from the ad platforms. Some would say this is relative to the ‘user’s quality vote’. Ad Platform Quality is often quantified by a minimum cost per click. The ad algorithm is very dynamic so the quality score can ‘change’ with every search term as far as broadly matched terms go. The quality score (minimum cpc) should be something that the software is able to make recommendations from and include in the math that determines whether a bid should increase or decrease. Other Ad Platform numbers that should be included are: position, number of conversions given that position, cost per conversion given that position, replace the word ‘position’ in the list with ‘ad copy stats’ and ‘keyword stats’. It gets complicated, doesn’t it? There is a lot more that can be calculated – we haven’t even started tying in analytics data! This really sucks to have to do manually…but it has to be done sometimes because the software that’s out there today sure as heck doesn’t do it – at least the 5 or 6 software suites we have tested don’t do it.

Business Determined Quality - are the key indicators for the business. One quick example is when lead volume is fantastic and the business doesn’t really focus on costs (while still important) because costs are a wash no matter what for that particular product. If lead costs drop significantly, that’s usually a good thing…until you realize that the lead volume has decreased dramatically. At this point, it’s a management decision whether or not the business will deal with a higher cost for the higher volume…but how does that translate into software? Usually, you key in your CPA or CPC expectation and the software strives to reach that goal without considering volume or other indicators that are possibly more important to the business. So what happens when you have two or three expectations and they all need to work together in prioritized fashion? Let’s say you need to focus on lead volume first, lead costs second and you want to ’screen’ people with ad copy…how do you tell your software to meet your needs? Software is static that way…and we are achieving fantastic results manually that were not happening when we used software! There is a time and place for software though…I’ll admit that we have to use it for some analysis on very large accounts.

Perhaps there is a happy medium for both software and manual bid management…we’re still trying to find a good foothold that can be applied to every account…for now, we’ll stick with what we know best – using a hybrid, tightly controlled mostly manual approach to automating bid management and making bid change decisions. The solution for us is a little bit of software mixed with a fair amount of manual analysis every single day.

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