3rd party bid management tools - worth the expense

Here at Affinity, we receive a lot of cold calls from bid management companies looking to sell their services to us. Their goal is for us, in turn, to sell those services on to our clients. To date, we have not aligned ourselves with any of these bid management companies, and don't intend to do so anytime soon.

Similarly, we have spoken with several clients who say that they have been approached by companies selling bid management tools, with promises of increasing the performance of their Adwords accounts, lowering their cost per click, increasing traffic and maximising return on investment.

So - what's the deal with bid management tools?

About Bid Management Tools

Bid management tools exist in numerous forms. The goal of any bid management software is to automatically optimise certain aspects of a PPC account to drive performance, whether by identifying the optimum cost per click that drives the most traffic within a given budget; lowering the cost per acquisition; or maximising bids on keywords that consistently generate conversions, in order to maximise revenue.

Most bid management tools rely on historic data to drive their decision making. For example, if data shows that, in the last 30 days, searches for ‘sturdy broom handles' are generating high conversion rates in the advertisers PPC account, then the bid management software will likely increase the bids on those terms, whilst lowering bids on terms that are not performing so well.

Ultimately, the goal of automatic bid management is to maximise performance, through reducing costs on keywords that aren't performing well, whilst driving visibility for keywords that are performing well, cutting out the need for constant monitoring and optimisation on the part of the PPC manager.

The Affinity Stance on Bid Management Software

Automatic bid management can be an effective tool when it comes to driving performance. This is none truer than when a client is advertising hundreds of individual products, each of which comprises its own set of keywords. Automatically controlling the bids in this instance can be an effective way of ensuring that bids are optimised to drive traffic and sales, across all products.

But as with all things automatic, there comes a catch. Bid management tools utilise a data-driven formula that aims to maximise conversions or traffic based on historic and current data. Humans - who are a sporadic and certainly random bunch - are not so easy to predict. We can make good assumptions based on data as to what people may be interested in and likely to purchase, but really all we can do is speculate and react according to readily available data. In addition, an increase in conversions and a lower CPA may actually product less revenue, or generate lower value leads. If left alone and unmanaged, automatic bid management can negatively impact performance in the long term.

So, whilst bid management tools can help make managing visibility and costs an easier affair for advertisers, ultimately it is the person in charge of those tools that dictate the long-term success of them. And of course, one must question how the bid management tool is determining what elements of a PPC account are performing and what are not. With PPC, there is simply far more to consider than cost-per-click, direct conversions and reaching CPA targets, if long-term success is to be guaranteed (see my previous blog posts on Multi Channel Conversions and Tracking Offline Success, for example).

Automatic bid management can certainly drive performance in a PPC account, but its usage must be monitored, controlled and a proactive and reactive strategy adopted in order to get the best out of it. In summary, a bespoke approach is best, based on the individual PPC strategy's needs and objectives.

And then, of course, there is Adwords' built-in bid management tools to consider.

Adwords Bid Management Tools

Third-party bid management companies abound the paid search marketplace at the moment, all boasting to maximise ROI and drive conversions for PPC advertisers. However, advertisers should ask themselves the following: what benefits can such 3rd party tools offer that Google can't?

Here's an interesting fact to consider: Google Adwords' in-built bid management tools have access to and consider historical user behaviour into their bid management algorithm - data that is not limited to the advertiser's account, but encompasses search behaviour across all of Google.

Google monitors user behaviour on its search engine, and looks out for certain ‘user signals' that suggest what the user's intention may be.

The bid management tools in Adwords - such as Enhanced Cost-Per-Click, for example - offer PPC managers control over their bids, but also relinquishes some bid control over to Google when the need arises. With this particular form of bid management, if Google deems that a particular search query is more likely to convert into a lead or sale, then Google may increase the advertiser's bids, in order to maximise visibility and drive clicks and conversions. Google will consider historical search queries on the whole of Google (not just your own Adwords account), as well as certain user signals which only Google has access to, that may hint that the user is keen on making a purchase.

Third-party tools, by comparison, will not be privy to any of this coveted user information, which Google is unlikely to share anytime soon.

And then there is Google's standard automatic bid management options, which puts the control of bids in the hands of Google - the user sets a maximum CPC or target CPA, and then Adwords will automatically optimise the bidding to drive clicks or conversions.

But, perhaps most importantly, Adwords offers all of these automatic bid management tools free of charge. Third party bid management tools will often charge a considerable fee (I can think of one such company that contacted us, and quoted at least £1,000 per month for a single account). And even if the bid management tool was successful in generating a higher return on investment, the cost for utilising the bid management software would likely severely hit into the advertiser's overall ROI.

Most marketing agencies worth their salt that manage PPC accounts on a full-time basis will also have access to Google's API, and can develop bespoke bid management techniques that are tailored to individual clients. Such tools will be designed and managed in-house, taking into account the unique requirements of the client. And, of course, such tools can utilise Google's own bid management rules when the need arises.

So, to conclude - we have identified that bid management tools can certainly be a useful asset in any PPC campaign. But we have also identified that they are readily available to most advertisers, without the need to outsource the bid management to a third party that specialises exclusively in this area.