Google's long-term plan to automate the advertising supply chain will lead the Mountain View, Calif. tech company on Tuesday to release two tools aimed at removing costs from serving up display ads across the Google Display Network.
The tools -- Display Campaign Optimizer and Contextual Targeting Tool--are geared toward helping advertisers reach performance goals on the Google Display Network, simplify the entire system to buy and sell display ads, and open the entire ecosystem through innovation.
Display Campaign Optimizer manages targeted bids to generate more conversions such as sales or leads by finding the correct sites that drive performance. It does this within milliseconds. The tool, based on machine learning technology, determines what works and what doesn't in real time and adjusts accordingly.
For campaigns with higher conversion rates the learning period is shorter, but if the company only sells one item per month it's challenging for the system to learn, according to Brad Bender, product management director for the Google Display Network.
Google employs brilliant engineers who like to solve complex problems. Think of the technology similar to the "self-driving car for advertising," Bender says. "It's auto-optimization that drives performance for advertisers in a way that works."
Advertisers tell Google the campaign's parameters, and based on the average conversion rate for a month in the specific vertical, the machine learning technology could determine the correct bids and placement. "Typically, the campaign is in a learning mode during the first week," Bender says. "The CPA could vary during that week. Once the system has enough data to shift the targeting and bidding, we start to see the CPA move."
Campaigns generating many conversions and impressions take less time to fill the data bucket required by the machine learning technology built into the tool. The lower the impression volume, the longer it takes.
Looking across the Web to connect with consumers who care about the environment to offer discounts, Seventh Generation, which sells eco-friendly home and baby products, found that Google's Display Campaign Optimizer delivered 60% of the coupon downloads with a cost per acquisition of 20% below their target quickly.
"If we can make display advertising more effective, we have the ability to grow the entire display pie for advertisers, publishers and users," Bender says.
The advertising industry could take a lesson from manufacturing when it comes to squeezing cost from automation. Rather than cutting costs for the delivery of raw materials through the supply chain, the advertising industry would eliminate costs to serve up ads online.
While automation in the manufacturing supply chain stretches back to the 1970s, the amount of cost savings driven by technology early on starts at about 5% annually, according to Kevin O'Marah, group vice president of supply chain at Gartner Research. "If you take automation and supply chain, and apply the broad principal to any other domain starting from scratch, you should be looking for between 5% and 10% savings in the first and second year," he says. "Depending on the deficiencies in the supply chain, it will taper off into a diminishing returns profile over three to five years."
Automation in the supply chain is about reducing unnecessary tasks and streamlining processes with technology to cut costs and eliminate waste. O'Marah says the savings could potentially become greater in the advertising supply chain.
A fully automated solution may not work for all campaigns. Advertisers should not have to sacrifice control to gain efficiencies and boost performance.
While the Display Campaign Optimizer automates the bidding and determining what works, the Contextual Targeting Tool automates the task of determining the keywords to target the words that work, so advertisers can boost performance by building campaigns in minutes rather than hours. The tool lets advertisers build hundreds of ad groups in minutes for companies that sell yoga gear, for example, to quickly scale campaign performance.
Companies can input a product the company sells like "yoga matt" in quotes into the tool to automatically generate hundreds of keyword lists. The management tasks would historically take hours.
The tool will roll out in phases and become available to all advertisers in the coming months.
Administrative costs remain daunting for the overall ad industry as it continues to serve up more advertisements to reach the increase in consumers flocking online. For every dollar spent, it costs between 26 cents and 28 cents in overhead to support the delivery of an ad, according to Bender, quoting industry stats. "There are opportunities that can make the process more efficient," he says.