Holy Grail, Or Just Another Tool?
For those considering bid management software, one analogy comes to mind. Many years ago when undertaking management training I was required to undertake a project management role for 3 months, so imagine my delight when I got my hands on a copy of MS Project and thought "Wow! This will be easy - the software will manage everything for me." Obviously, MS Project does not make you into a project manager, and it is equally true that bid management software does not make you into a Search Marketer; it just provides you will some advanced tools to take your search marketing to the next level.
For those not familiar with bid management I have outlined some of the key capabilities of modern bid management systems below. The capabilities discussed are primarily taken from www.keywordmax.com and www.atlasonepoint.com
There are two basic settings in any bid management project. These are the maximum bid that the software should bid up to, and the optimum ranking/position that you would like to obtain for each keyword. In a simplistic model, the software will increase the bid periodically (a number of times per day) until either the optimum rank is achieved or the maximum bid is reached.
Position Bidding (not all possible in Adwords)
There are a number of more complex ways in which the desired rank can be determined. These include Bid Shadowing, where you specify a target URL (competitor) and set it to whether you would like to rank above or below them.
Because of the way the bidding system works, there are gaps in the amount each advertiser is paying per click. These can be detected by the software and your bid adjusted to take advantage of the savings the gap represents per click.
The final and most interesting form of position bidding is only for the most aggressive advertisers, but all of us need to be aware of it. It is called Bid Jamming, and works like this: There are 3 advertisers A, B & C. [A] sets max bid to $4.00, [B] to $1.00 and [C] to 20 cents. An advertiser only pays 1 cent more than the next person's max bid and so [A] pays $1.01 per click, and [B] pays $0.21. However if company B employed a Bid Jamming strategy they would increase their bid to $3.99 and company A would now be paying $4.00 per click! Company B still only pays 21 cents. Bid management software also provides Bid Jamming protection that minimises the effect of competitors trying to jam you!
By placing tracking code on your site, you can use a number of outcome metrics to control how much you bid for specific keywords. At the simple end, you would track enquiries you receive and adjust bids automatically so you only pay $20 CPA (cost per acquisition).
At the other end of the scale, an e-commerce site offering a wide range of products would calculate the average margin or profit of each order and create rules to adjust bids on this basis. This allows bidding for high margin items that's more aggressive than bidding on low margin items. The impact on your bottom line can be dramatic.
Time Based Bidding
In many industries the conversion rates vary by time of day and day of week, and using bid management software to control bids and campaigns on a time basis is the only practical option. The easiest way to get started is to review your conversion rates by the hour to see if any variations are detectable. You may need to undertake a small data gathering project to get useful information.
Advanced Campaign Optimisation
Many software providers are starting to bring out more advanced "learning" systems that automatically devise rule-based bidding strategies by analyzing a campaign's past performance. These systems do need sufficient amounts of volume and historical data as well as accurate keyword grouping to work well, but do offer interesting opportunities.