Portfolio Based Bid Management vs. Keyword Based

Latest in my interview series was a fascinating chat with Anil Kamath, the CTO of Efficient Frontier. I have long been a fan of using bid management solutions to increase the ROI on PPC campaigns. What Anil and I talked about is how a portfolio based approach provides better results than the classic approach of measuring and acting on the ROI on a keyword by keyword basis. Our conversation went into detail on how a rules based keyword based approach is limited, and why a portfolio based approach is better. One of the biggest problems with trying to measure results on a keyword by keyword level is that most likely only a small percentage of the keywords in your campaign will ever have enough data for a bid management tool to draw a conclusion. For example, if you have 2000 keywords in your campaign, odds are that the great majority of these are terms focused on the long tail. To illustrate, if you have a 2% conversion rate on your PPC campaign, and if you need at least 10 conversions for a rules based approach to work, then you need 500 clicks per keyword before a valid decision can be made. In large campaigns, many of your keywords may not get 500 clicks in a year, and you just don’t want to wait that long to get results from your bid management tool.