Wag the Dog: The Tail of Bid Management

Bid management is one of the cornerstones of search marketing strategy -- but should it be?

Bid management software arrived on the scene of search engine marketing (SEM) many years ago to solve one of the biggest challenges of the day: how much to bid for a keyword? With SEMs managing millions of keywords and -- as a result, millions of bids -- technologists saved the day by writing software to manage the process.

The Trouble with Bid Management Software

The debut of commercial bid management solutions was met with a collective sigh of relief by the SEM community. These products helped marketers automatically place bids across a large number of keywords, and also provided clients with detailed post-campaign performance reporting.

Wag-the-long-tailThe trouble is, relying on bid management software isn't sufficient to ensure optimal campaign performance. Search marketers need to focus on maximizing relevance and conversion before bid management. Relying exclusively on bid management solutions to drive the success of a search campaign is letting the tail wag the dog.

Today's bid management tools generate a bid for each keyword based on estimated/observed click-through rates (CTRs), landing page conversion rates, and conversion values. But bid management solutions only passively observe these key metrics -- they do nothing to improve them. CTRs depend on the relevance and quality of the ad copy; landing page conversions and value depend on the relevance and quality of the landing page.

Because bid management software essentially treats ad copy and landing pages as "givens," its ability to make a SEM campaign successful is hamstrung by the quality and relevance of its ads and landing pages. Bid management may deliver the "right" bids, but, with irrelevant ad copy and landing pages as "givens," those keywords are most certainly not living up to their potential.

Improving Relevance and Conversion at Scale

The main problem is that bid management tools don't tackle the core problem faced by SEMs today: improving relevance and conversion at scale. How much an advertiser should bid on a keyword isn't just a function of the keyword itself, but also a function of the keyword's relevance to the entire search experience it represents.

And relevance can have a big impact on keyword bids: the "right" bid is intrinsically related to the relevance of the ad and landing page shown to a searcher.

Bid management solutions can optimize bids for any keyword and any client -- even a mediocre ad that sends searchers to the home page of a site. But by focusing on the relevance of the search experience, marketers can dramatically improve ad copy and landing pages by making them more targeted to the searcher's intent.

With highly-relevant ads and landing pages, conversion could double. And, if conversion doubles, bids could double too, which in turn could dramatically improve campaign volume.

Two Examples

Consider the two examples below for the SuperDuperPetstore bidding on the keyword "Royal Canine Chihuahua kibble." In the top campaign, a generic ad would result in a lower CTR; a generic landing page would result in a lower visitor to conversion rate; and, given a target cost per conversion (CPC) of $4.00, bid management software would eventually arrive at a $0.20 CPC.

Bid-management460

In the second example, SuperDuperPetstore.com decided to start by focusing on delivering more relevant ads and landing pages. By creating more relevant ad copy, the CTR has doubled.

Quality score and average position of the ad will increase, and the volume of clicks from the keyword will increase, even without increasing bids. By creating a more relevant landing page, the SEM can now afford to bid $0.40 per click -- two times higher than before -- while maintaining a target CPA of $4.00. And by bidding 100 percent higher, SuperDuperPetStore.com could expect to see even more clicks from the keyword.

The Secret to SEM Success

Focus first on improving ad copy and landing page relevance and maximizing conversion and then on bid management. That's the key to a successful SEM campaign -- and that's when the dog starts wagging its tail.

The future of paid search is all about improving relevance at scale. Rather than pounding each other on the head with bigger bids, search marketers will need to focus on understanding searcher intent, and leveraging that knowledge to drive keyword selection, and create highly relevant ad copy and targeted landing pages that maximize click-through and conversion. Only after these critical steps are complete can bid management tools deliver an optimum bid.

Maximizing relevance isn't an easy process -- especially for a massive keyword portfolio. And doing it "by hand" is downright impossible. But SEMs will be comforted to know that solutions are emerging to enable marketers to deliver millions of relevant ads at Internet scale -- and the technology is getting lots of tails wagging for the right reasons.