Bid Management: Rule-Based vs. Portfolio

If you are working on sizeable search marketing campaigns you are probably well aware that managing bids for thousands of keywords manually becomes impossible to do efficiently. You need rules and algorithms to adjust bids for you and act and react to changes in the marketplace according to your predefined strategy. Adobe even thinks that “it is the models and algorithms that distinguish the players in this space.”

Adobe offers a variety of resources for search marketers in their online search centre, and among them a comprehensive white paper on portfolio-based bid management algorithms. Portfolio optimization stands in contrast to rule-based bid management. A rule-based keyword bid system would look at every single keyword mostly siloed from the rest of the campaign. For instance, you could sell DVDs online, and you could set the maximum amount you want to pay for a conversion to $20. Your system would take care of not stretching this limit for any of the keywords you are using. If the search term “harry potter dvd” would convert at around $21, your system would simply decrease the bid on this keyword or pause it. There is nothing wrong with that and this method would assure that “harry potter dvd” is converting at an acceptable cost. However, the portfolio approach says that this is thinking too short. Your overall performance might actually be better if you take advantage of the maximum amount of “harry potter” traffic, even if this means paying more for these conversions than you are willing to, and in turn making up for this with other keywords in your account that are converting more cheaply, and thus at the end of the day arriving at a higher ROI and conversion numbers than with a rule-based strategy. That means that a portfolio approach will look at all possible combinations of bids across all the keywords in your account, and then choose the best combination to maximize the overall outcome. It is clear that an extremely sophisticated and fast algorithm is needed to continuously adjust bids across a large account, as there are countless variables from position to CPC and CTR to be considered and all keywords need to be regarded as part of an ecosystem.

The portfolio approach can theoretically work very well – if not best – for campaigns with clearly defined goals and target margins and a predetermined schedule that is not constantly being changed or switched around. Note that there is also a cost involved whenever you connect to the Google AdWords API.

If you would like to read more about portfolio-based bid management, we highly recommend you give to Adobe white paper linked here a read.

Google's Automated Rules in AdWords

This is a new feature in Adwords, still in the beta* stage of testing, which allows advertisers to schedule automated changes to specific parts of their accounts based on the criteria they specify. Sounds brilliant…Or so I thought when I first heard of i! But is it really?

The idea behind automated rules is to help advertisers who manage large accounts to save time by creating specific rules that will help manage these accounts more efficiently. They also allow advertisers who are constantly making manual changes to the accounts to automate these changes by creating rules.

So where and how, do we create these rules?

If and when it’s released, the automated rules button should appear within your Adwords account right next to the “Alerts” button. You can create automated rules on a campaign, ad group, keyword and ad level. Upon clicking the automate button a drop down menu appears that looks like this:

By selecting one of the options you will then be able to further customise your rule according to your specifications.

There is also a functionality that allows you to preview your newly created rule, recommended.

Sounds fantastic, but I am still not convinced!

Whilst researching and testing this nifty new innovation I came across a few limitations and concerns raised by others who were also using it, as part of the beta* testing done by Google. The following screen shots were taken from Search Engine Land and The Search Agents web sites.

*[Beta testing] Google allows certain clients the access to use their latest innovations and give feedback on their performance.

These are interesting points raised as to the limitations of this new, soon to be released feature in Adwords. Most of the concerns related to bidding and how dangerous it becomes when creating your own rules for adjusting bids. If the rules are created recklessly you could find yourself paying more for clicks than what you should be. I would advise that when it comes to bidding to rather stick to the right tool to do the job. Rather consider the bid optimizer function within Adwords to work out your bidding strategy. I think it would be imperative for Google to educate advertisers as to the possible pitfalls when creating rules for adjusting bids and give a detailed outline as to what the best practises are when using this feature. When I was using the feature, I found a lack of information on how best to operate it. I sincerely hope this will change before it’s released for mass consumption.

I think it would also be a good idea to enable advertisers to create rules on an account level. Let’s say I wanted an account paused once it has spent a certain amount of budget and reached a certain amount of conversions. Guess what, I can’t do this. Currently this can only be done at a campaign level. This means if I have 5 Campaigns in 1 account and wanted to stop my ads from running once the account has reached 50 conversions. The best I could do is, to limit my campaigns to 10 conversions each. This however doesn’t work as it would stop campaigns performing well within the account and may even stop me from getting my daily 50 conversion requirement. As I can’t predict where and in which campaigns my conversions will come from.

Will automated rules benefit advertisers?

Well when it comes to creating rules for changing bids I would NOT recommend applying them to well established accounts and keywords that have a significant amount of history. You do not want to mess up what has been working and optimized to perform well. I might use them with the utmost of caution on new keywords or new parts of existing accounts and monitor how the rules affect them.

I found that creating rules for budgets to be the safest way to go and a handy way of rewarding campaigns for doing well. Let’s say I set a rule that allows a specific campaign more budget if it reaches a certain amount of conversions at a favourable conversion rate. Then I would have saved myself some time and adjusted the budget when I needed to. I would avoid punishing campaigns for not performing well. Why? You can never tell when or where that next conversion is going to happen. If you create a rule to pause a campaign when it’s not converting but still spending. You might just loose out, as one more click could have resulted in a conversion.

I think that automated rules button is just another handy tool in the PPC optimization tool box, for Adwords advertisers. I look forward to the point where Google has ironed out all the wrinkles of this potentially great feature and it becomes a standard feature on the User Interface.