Marketing Pilgrim's "Search Marketing" Channel

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SMX Notes — Debate: Is Bid Management Dead?




Moderated by Jeffrey K. Rohrs, VP, Agency & Search Marketing, ExactTarget

Team Bid Management is Dead
Misty Locke, President & Co-Founder, Range Online Media
Bid management isn’t dead, but you can’t expect it to solve all your problems. It’s not a “set it and go” thing. It’s a useful tool, but it shouldn’t be your only one. The right set of tools, human supervision and strategy will ultimately prevail.

Of course technologies like bid management can streamline processes. But you can’t use it as the only key to success or solution for marketing.

3 Basic “Principals” [That’s ‘Principles.’]
A campaign focused solely on bid management solutions is flawed because

  1. of the basic, limited build/mechanics of bid management tools
  2. it engenders a ‘tunnel vision’ view of search marketing as keyword, keywords and only keywords
  3. it cannot account for consumer intent

The limitations of bid management tools
With the new “Quality Score” systems in use by Google and Yahoo, the “bid landscape” has been obscured. Before, we had competitive intelligence enabling us to “game the system.”
API data may be flawed or delayed. Humans can understand this; computers think this means it’s time to raise bids since something’s going wrong.
Automated bid tools are reactive instead of proactive. They can’t anticipate trends or upcoming changes.
Limited data = uninformed bidding. No bid management tool can understand and fully compensate for variables like quality score, click-through rate, promotions, campaigns in other channels, trends & shifting trends, news and other influencers.

Simplistic Tunnel Vision—Viewing marketing as only keywords.
All marketing, including search marketing, is about generating interest and demand. Lots of things influence demand, intentionally or not, including search interfaces, search silos, social media marketing, email marketing, branding, targeting, etc.

We need to focus on optimizing the influence [‘interfluence,’ perhaps?] of other media on online programs and search programs. There’s a 91% performance lift when you integrate natural & paid results; 58-82% of all search conversations start with a “non-brand search.”

It’s not about the “last click to conversion.” It’s about optimizing all the channels, using multi-channel marketing to affect offline to online conversion, and vice versa, and acquire new customers. Focusing only on immediate results limits us, limits growth, caps new customer acquisition.

Accounting for Consumer Intent
Marketing isn’t an exact science (more of an art influence by science). Viewing search as just a direct marketing vehicle inherently limits the medium. (Her graph shows that the vast majority of conversions occur within one month, not immediately or within a day.)

Cross Examination [Hurray! Just like Law & Order. Oh, but without Jack McCoy. Boo.]
Ground rules: No yes/no questions. The cross examiner may cut off a reply if he feels the witness respondent is stalling.
Conducting the cross: Robert Ashby, Microsoft (formerly Director of Search, Expedia)

How can you expect humans to manage thousands of keywords?
I think bid management tools have a place, but they’re not the be all and end all. There are many tools with different features and capabilities; one size doesn’t fit all.

Are you conceding the point?
I’m conceding that bid management tools can help, but not that they’re the only way.

There’s an open question out there. The outside influencers you mentioned: aren’t those the things influencing customers as well?
Not always, sometimes you can’t put a bid management tool on your system and walk away. It’s not just consumers’ intent, it’s marketers’ intent

Think of it like John Henry versus the steam hammer. Tools enable you to run a larger, more profitable campaign. How else can you do this?
Time

Team Bid Management Isn’t Dead
Chris Zaharias, Senior Vice President, Strategic Initiatives, Efficient Frontier
Let’s start with a look at the history of bid management. People began taking advantage of search by starting to buy keywords. Many built Excel spreadsheets to manage keywords and tell them which to bid more or less on. Hence early bid management. I will concede that the notion of a webified Excel spreadsheet is no longer viable because search engines are no longer transparent. However, there are many proofs that bid management not only still exists but that it works well.

Proof 1: (Graph slide.) This is a simulation of the sum total of all data for an ad campaign on a search engine. On the x axis, daily ad spend. The y axis, daily transactions/signups. This set of points is all the possible operating points for a campaign. This is real time, meaningful data.

I agree that there’s more to search, but I think the biggest challenge in search is that agencies don’t have enough time to do all of the things that add up to advertising and merchandising because they’re spending all their time managing these stupid things. There are very few advertisers and agencies who can scale manually.

Proof 2: At least a dozen firms building and selling bid management systems: aQuantive, DoubleClick, 360i, Omniture, etc. etc.

Point taken that the traditional “set it and go” approach doesn’t work, but again, lots of firms are doing data mining (a prerequisite for bid management).

Many firms have build the ability to take situations, weight recent data more heavily, or factor in assists.

Cross Examination
Conducting the cross: Peter Hershberg, Managing Partner, Reprise Media
When there was complete transparency, the only way to secure a higher position was by paying more per click, correct?
Yeah.

How can they improve now?
Improving your click-through or conversion rate or by bidding on unpopular keywords.

How about changing ad copy or the landing page content?
Thos absolutely can decrease CPC.

Quality score creates a scenario where two advertisers are required to pay different prices for same position per click?
Yes.

If I have a lower CPC than you do for the same position on the same keyword, how can bid management help you win out? Haven’t I already won the auction?
You should optimize your returns for search.

Yes, but would you agree with the statement that, regardless of bid management, you can’t be as effective and profitable?
To the extent that the advertisers have equal ability to address quality factors.
[I.e., if you’re the one with the lower CPC for the same keyword/position, but you have no interest/resources to continue to improve your quality score, but someone else does, they may be able to better increase their quality score and lower their CPC, eventually winning the auction.]

I don’t have anymore questions.

Rebuttals
Peter (side A) [the dead side]
There was a time when bid management was equivalent to a search marketing campaign. The success of a campaign boiled down to its effectiveness, gaming system. We’re moving to a system to whose ads are most relevant. It’s one variable in a much larger equation in this stage.

Our sense is that bid management would become commoditized over time. Will MSN and Google give away their recently-acquired bid management tools for free? What would happen would be the same as in other industries. You can’t try to bid manage to success.

Mindy (side A)
I think Peter said it well; I don’t have anything to add.

Chris (side B) [the undead side]
It’s been a challenge because you have 50,000 keywords or 100,00 keywords or 5,000,000 keywords. What would I rather do—manage them or get to work? I’d rather be having a conversation with my customers. You’d rather be looking at Q&A model. There are a number of variables. The challenge here is time, limited time I disagree that it’s dead. It’s a foundation by which you’re enabled to do other things. Bid management is the one thing you don’t want to spend a lot of time on but you have to. It saps your resources if you’re not managing it in a scalable way. Bid management allows you to focus your attention on areas outside your campaign that are valuable and quickly react. A bid management system can look at the world holistically. It can predict what customers need just like Google, Yahoo and MSN do.

Robert (side B) [the undead side]
Search marketing is in search & content. The last bastion of scaling is taking the $500 billion plus advertising industry & making it more efficient. We’re seeing Google and Yahoo getting into TV and radio—the same auction systems are gonna find their way into the global ad market. The only way that won’t happen is if we have a total catastrophe. Auctions are the future. Long term, bid management & keyword management in general is a commodity & these systems will drive buying and selling of all media, not just search.

One other point—when we tell people about our solution, more important than working with us, you need to work with a technology (whether you build or buy). The things that matter most are looking at the impact of other channels/optimization. People get stuck with what’s essentially a never ending math calculation.

Misty (side A) [the dead side]
Some smart points have been made today. Whether Chris and Robert agree, I think they did pretty much agree with my statement. You do need tools to help you get the job done, and you do need to help with bid placement and management of thousands of keywords. We use technologies. Real search marketers look at search marketing outside of just a bid placement tool. They don’t just look at immediate return. A keyword is just as important as your television ad. You can’t make it great just by bid management alone. It needs human influence—industry, consumer and marketer. It’s not just math. You limit yourself & search marketing and it will go away if you think of it as “just a keyword” and “just a bid.”

Peter (side A) [the dead side]
All major search engines are going toward quality score/lack of transparency. It’s been frustrating, but it’s put the M back in SEM. Previously, people thought of it as math. At the end of the day, it’s marketing. We need to look at all variables and factors.

Jeffery (Moderator): I think we’ve reached a consensus: it’s certainly not dead, but what’s changed is the kind of prominence it takes in your campaign

Audience Q&A
The current bid management system is designed to support the traditional media ad buy. When it goes to the public free, the public won’t be in that model. Will the game change again? Also, with new Google Analytics, we can see that in some ways it’s smarter than Urchin; in other ways we can see that it’s dumbed down. What’s in the future for bid management tools? (Sorry, a lot of the time I couldn’t see who was answering the questions)
All of these services will have some capabilities for helping advertisers optimize their campaigns in all media formats. Some standards can be worked out on transmission and privacy of data. There’s a scenario 5-10 years out where bid management is offered by networks themselves, but we’re a ways away from that because of low trust. Despite Google Analytics, the total marketshare by independent firms is an order of magnitude bigger than what search engines provide.

Good point with Google Analytics. It’s hard to speculate, but that’s in line with the expertise that search marketers have today; less well-versed in web analytics.

Jeffrey: Poll for the panel. How many think that networks will offer direct bid management (fully integrated in their systems) in 5 years? 10 years?
They’re already offering that to some extent.

Will it displace third party management?
I’d have to say is that markets want to be efficient. At some point a search engine will force advertisers to be more efficient with a CPA system instead of the current system. That’s still a good 5 years out. Until then, most people will trust themselves or third parties before trusting search engines. There’s the example of the Panama roll out in Asia .

Can you give us examples of ways you’re taking strategy & implementing it to manage thousands of keywords?
Misty: Like, how are we utilizing bid management tools? I think that some keywords are good for bringing awareness (not purchases)—you can’t measure that in ROI. We use bid management to become more efficient—uploading and downloading data, dayparting. We do a lot to promote online and offline keywords. In a high peak period, the bid tool sees when clicks aren’t converting and will take them down. For example, Nike bidding on [lebron james] during basketball season. The ads aren’t converting so it takes it down. The rest of the year, it runs.

Measurements of engagement with target audience. If you can figure out the value of those interactions with your target marketing in terms of brand building, you can use a keyword management system for the process of optimizing for that task. The notion you can measure things is what makes people spend ad money online.

(for Peter & Misty): I’ve never heard of bid management as commodity. Do you really feel that? (for Robert): When you managed Expedia, did you feel bid management solutions & tools were a commodity?

I’ve seen campaigns run with Excel spreadsheets—but there’s an inherent risk in that. At Expedia, we saw improvement in the things where we didn’t know there were issues. Long tail is good for bid management; it’s almost impossible to do manually. Yahoo has gone away from having that transparency. I don’t think it’s a commodity, but a limited, scarce resource. Also, targets shift.

Misty: About 3 years ago, we did a study comparing the bid management tools. All have the same basic checklist, all are rule-based, have basic skill sets. Some have more advanced specialties. But it still doesn’t allow for all influences to be calculated in.

If a system can be gamed, it will be. Bid management is in the process of dying. There are a whole bunch more parameters & that number is increasing. Robots & engineers will take it over. But everyone here has to learn how all the different parameters work so we can optimize better, market better. (Okay, it’s a statement.)
There’s a really straightforward way to describe systems in search. If you look at the Japanese search marketing or the European market today, all they have to do to succeed today is to buy keywords. Bidding is not as competitive. The evolution of search marketing is to a.) do basic things and find kw, and b.) do testing. You don’t need bid management there. But as advertisers learn those, they advance—they hit the ceiling beyond which best practices don’t help anymore. The massive amounts of historical data can’t be utilized. The role of a bid management system isn’t to take campaigns to the next level but to make data usable. I think that it’s absolutely not a commodity because most advertisers are getting to the point where everyone here knows what they’re doing, but we still are overwhelmed by data. Search engines won’t solve it; they care about revenue per query, not ROI.

Misty: I agree that you can get to a point where analytics don’t help further, but if you get to that point, you need to expand your campaign. You’re just looking at your keywords. Last month’s data is almost irrelevant at this point. If you’re hitting a ceiling, you need to optimize your campaign but you can’t just look at your keywords alone.

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