PPC Bid Management Strategies: An Interview with Todd Wilkinson of WordWatch
Todd Wilkinson, CEO of WordWatch, began his online career in 1999 with WorldOnline/Tiscali, a pioneering European ISP. Todd later co-founded a digital agency in Amsterdam in 2002, called iizt (pronounce “east”), serving the advertising industry in the Benelux. In 2006, Todd co-founded and served as CEO to Respectance.com, a social media play described by TechCrunch as the “MySpace for dead people.” Funded by two European VCs, Respectance was located in San Francisco, CA and Amsterdam, NL. Todd exited Respectance in 2010 and launched WordWatch in March 2011, based in Foster City, CA and Amsterdam, NL, with production and algorithm development in Krakow.Here's a quick video overview of the WordWatch concept: -->
You believe that bid management is the most time-intensive part of search engine marketing. Why is it so time-consuming and what strategies can advertisers use to streamline the process?
Small business advertisers know their products and they know how to communicate with their customers. They can write their own text ads and choose their own keywords—but to maximize profit from their PPC investments, they need to be monitoring, analyzing and adjusting their bids on a regular basis. With 10 or 20 keywords, that’s not so difficult to do manually. But the time requirements of doing this for 10,000 or 20,000 keywords (or hundreds of thousands for that matter…), makes it impossible to do this manually.
Many small advertisers start out well in PPC but as they grow their campaigns, increasing the number of keywords, they begin to encounter reduced performance. With respect to coping strategies, some try “setting & forgetting” their bids. They always end up losing money. The only other options are to outsource campaign management or hire full-time PPC managers. However, many small businesses find the cost of active bid management prohibitive. Unfortunately, many small advertisers will grow to a certain size and then abandon PPC; it’s a real Catch-22.
Why is the PPC landscape more difficult for small and medium-sized businesses?
Larger advertisers (with larger budgets) have access to professional agencies who often use bid management software. Because their campaigns and PPC bidding are better managed, they achieve better quality score and are rewarded with lower CPCs and higher ad rank. As a result, when small advertisers compete with larger ones, they generally pay more—yet have inferior performance. Ask yourself: when was the last time you saw a small advertiser appear above a large brand’s?
What are the basic best practices of bid management that WordWatch aims to automate?
We start with the customers’ goals. After signing up to WordWatch, customers choose which “strategies” they want for their particular adgroups and campaigns. They may be looking for maximum conversions, or maximum clicks, or a branding strategy, an ROI strategy, etc. Depending on those goals, WordWatch begins acting much like a human SEM expert would: it starts with analyzing the customers’ historical data; identifying patterns; and making informed adjustments. The advantage that WordWatch has is that it’s a machine: it can make those analyses and adjustments across tens of thousands of keywords concurrently—and do it every day!
What are some guidelines for altering PPC bids – how do you know how much to bid up or down?
In general, an advertiser bidding manually needs to work with trial, error, and time (and lots of all three!). There are some indicators available for where to start: Google, for example, informs the minimum bid to appear on the first page at a given time. AdWords also provides a bid simulator (as a latent indicator); neither, of course, provide any prediction of the future.
Advertisers needs to think about the maximum they would be willing to pay for a bid. Often, the higher the position of the ad, the more results it will return. Position is the product of that max CPC multiplied by the advertiser’s Quality Score. An advertiser may slowly increase or decrease the max CPC bid and carefully monitor the results: when ROI plateaus, or the returns begin diminishing, then the bid is has become optimal—at least, for that day. At the same time, the advertiser should be managing bids with the goal of improving Quality Score; for example, with an eye on CTR.
The tricky part is identifying keywords with potential; giving them a chance to perform by adjusting CPC—while mitigating that against an acceptable margin for loss. In other words, the advertiser needs to risk a certain amount on a promising keyword but also know when to give up on it. That’s why trial, error, and time are so important. That’s also why doing this manually is so time intensive, and is amplified as the size of campaigns increase.
As far as how WordWatch deals with PPC bidding, a primary guideline is to stay within the customer’s chosen parameters. WordWatch never changes a customer’s expressed budget or max CPAs, etc. But within the limits established by the customer, in general it reallocates budget to improve ROI. Think of a betting strategy at a horserace: all bets need to be placed before the gate opens. But what if you could readjust your bets at different stages of the race? You’d probably reallocate your budget to the horses in front and take it away from horses that are falling behind. WordWatch does something similar: it seeks to identify performing keywords and keywords with potential. It then increases or decreases CPC according to its analysis and then sees if its bets were winners. If the feedback is positive, this suggests to continue the betting strategy until diminishing returns occur.
How does Quality Score fit into the PPC bid management equation?
Quality Score is central to bidding: high-quality advertisers are rewarded and poor-quality advertisers are punished. There are many elements to Quality Score, such as CTR, that WordWatch algorithms seek to enhance.
When should advertisers optimize for clicks and when should they optimize for conversions? How do your algorithms handle these different goals?
Every advertiser; even every ad group, is different. In general, most small business advertisers are seeking conversions. But clicks (i.e. traffic) are also important: they may be sought by themselves, or as precursors to conversions. Our strategy algorithms often share common elements (such as ad score optimizing) but work within the parameters of the specific goals (e.g. CPA ranges for conversions opposed to CPC ranges for clicks).
How does the branding strategy option work?
An advertiser may be looking to get his brand out there with maximum awareness—without necessarily considering clicks or conversions. That can mean appearing at the top position in the broadest of brand name searches. It can also mean appearing on the content network. It can mean finding the opportunities for the highest positions for the lowest CPMs using site targeting features.
What other bid management tools out there do you find useful?
There are a lot of smart tools out there these days; some are free and some are not. With respect to automation, Google itself offers limited rule-creation functionality—but that assumes a level of expertise that many small business advertisers do not have.
Can you tell us a little about WordWatch and how it works?
Sure; WordWatch is a web app providing automated bid management for small business PPC advertisers. Customers come to the website, select their monthly plan, and then choose strategies for their campaigns and ad groups. The WordWatch algorithm-driven engine then takes over their keyword bidding, making sure to optimize their bids on a daily basis—with the goal of delivering more bang for the advertisers’ buck.