- Category: September 2014 - Search Engine Marketing
Whether it's about increasing traffic, boosting conversion or maximizing revenue, bid optimization is one of the cornerstones of search engine advertising (SEA). Depending on the industry, publisher, device or region, the bidding strategies differ considerably as well.
Search engine marketing experts are therefore using a variety of methods, algorithms and technologies for the bidding, in addition allowing to choose between proprietary, publisher and third-party solutions. The success of these tools depends not only on how good they are, but also on their capacity to calculate optimal bids in highly dynamic and highly competitive auctions.
Hence, I present here the most important features that distinguish successful bidding solutions and explain the role they play in the SEA-bidding strategy.
1. Flexible compilation of revenue
In order to reach a cost-per-acquisition (CPA), return-on-investment (ROI) or maximized revenue on a limited budget, SEA managers have to match publisher clicks and costs with sales data from backend systems. In order to combine these data sets usefully, a solution is needed that supports existing back-end systems and builds a bridge between the online marketing channels and the achieved online or offline conversions.
For example, online applications for life insurance and mortgages often require from customers an offline authentication or authorization by the appropriate local branches. In order to capture revenues generated through various channels and touch-points, a flexible interplay of analysis, ad serving, call tracking and CRM systems is required. This gives advertisers not only a single point of truth, but allows them to calculate bids on the basis of full performance data. Consequently, it is important to select a proper bidding solution, considering that it makes the integration of a variety of data sources possible.
2. Precise attribution
Bids on keywords are only as effective as the data with which they were calculated. Hence, the detection of the turnover is only the first step in a reasonable bidding strategy. To create the best bid possible, SEA managers must also be able to attribute conversions and sales to the keyword that triggered the conversion. The accuracy of this attribution at keyword level depends on whether the advertiser has the ability to capture differences in consumer behavior.
Consumers usually perform frequent queries prior to a purchase, more or less depending on the product category and industry, where they come in touch with multiple ads. As you can imagine, an effective bidding solution must therefore be able to allocate the revenue to all participating keywords. Equally important is that it provides flexible options that assess keywords in the click path differently: Sometimes it makes sense to attribute the turnover only to the first and the last clicked ad. In other cases, the stronger weighting of clicks at the end of the conversion path delivers the best results
3. Relevant Data
Whether it comes to choosing display contents with the best performance or to calculate optimal keyword bids, it is crucial for the optimization of the SEA performance to make decisions based on a significant amount of data. With a limited data base, there is the risk that the bidding solution is calculating bids too high or too low - both results in a suboptimal keyword performance. Solutions that combine low-volume keywords with similar performance, and can deliver a statistically significant bid estimation with the aggregated data base, are an advantage.
4. Defined KPIs
In order to measure the success of a bid strategy, SEA managers need to identify the important Key Performance Indicators (KPI) to optimize the campaigns. Even if this seems trivial, the selection of a suitable KPIs can be quite complex.
For example, it is common for online retailers to maximize revenues while maintaining a target ROI, which means two KPIs are involved. Companies whose goal is the lead generation and to achieve their sales long after the first click, must choose between a more or less reactive cost-per-lead (CPL) or a more accurate ROAS (Return on Advertising Spend) target.
Ultimately, a viable bid strategy always depends on whether the business model has chosen the appropriate KPIs and the bidding solution must be able to merge these very different KPIs in the bid calculation.
5. Seasonal adjustments
Temporary power fluctuations, such as increasing revenue per click (RPC) or a decrease in the conversion rate, are not uncommon. The cause are seasonal influences, such as e.g. the Christmas shopping season. Promising bidding strategies must, therefore, take into account this aspect of seasonality and SEA managers must continuously analyze the performance of the previous year and adjust bids accordingly.
Schedules with phases, in which the bids will be automatically increased by a certain percentage, enable search engine experts to optimize campaigns for their fluctuating RPC or conversion rates pro-actively. In the season for certain products, it is important to bid more aggressively on appropriate ads and react reserved off-season. A bidding strategy that isn’t geared to the season, leads to loss of significant revenue opportunities, allowing competitors to make the money instead.
6 Cyclic adjustments
In addition to seasonal variations, cyclical changes occur in the RPC or in the conversion rate which have nothing to do with the season. Thus, the performance varies, depending on the day of the week or the time of day. A typical example is the rise of mobile conversion rate in the afternoon and evening, when the users of mobile devices are surfing the web on their way home, or a decline in desktop RPCs on weekends.
To capture these cyclical fluctuations, SEA managers must analyze campaign performance over several weeks, identify daily changes of RPCs or the conversion rate, and analyze the daily performance on an hourly basis.
By taking into account these trends, search engine experts can develop an individual strategy for each and every specific campaign for a particular part of the day, where keyword bids rise and fall on a daily or hourly basis. For such sophisticated bid scenarios, powerful automated bidding solutions are particularly necessary.
These six basic requirements are only the groundwork for successful SEA strategies
Experienced search advertisers also take into account aspects such as the conversion latency, different conversion types, or the prediction of performance on the basis of "what if" scenarios.
For those particular strategic approaches, advanced bidding tools are required and every business model and every industry needs its own strategies.
Thus, last but not least, SEA managers need bidding solutions with maximum flexibility to achieve their ambitious goals: to maximize revenue in an increasingly competitive market environment.
By Daniela La Marca