Preparing for Bid Management? Start with the Basics

Fluency_LogoSince the 90s, Content is King has been adopted as a fundamental digital advertising mantra with intentional strategies designed to support it. Agencies and businesses alike have worked tirelessly to create unique, relevant content as a means of driving more qualified traffic to their websites.

As with anything practiced over decades, oftentimes the fundamentals become easy to overlook in lieu of focusing on what’s new or next. In digital marketing, look no further than what’s happening currently in the evolution of SEO. We’ve reached the point where the art and science of SEO are at risk of being dismissed as table stakes and forgotten about entirely by some.

The strategy of pay per click (PPC) advertising has always been centered between creating relevant content and effective bid management. More recently, content has become increasingly more difficult to manage as agencies are serving a higher volume of local businesses (SMBs) who are looking to advertising dynamic inventory. As such, more and more agencies are allowing the fundamentals of content management to go by the wayside and have become reliant on bid management. While this might seem like a minor shift in focus, the impact becomes more evident as we simplify the math.

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The first step to understanding the financial consequence of over-focusing on bid management is recognizing that impressions — not cost per click — are central to Google’s monetization strategy. To make sense of how impressions drive Google’s monetization model, let’s explore the scenario below:

For easy math, let’s assume Google is serving up 100 impressions for a specific search on any given day. Company A has a maximum bid of $1 and a CTR of 100%, while company B has a max bid of $2 and a CTR of 25%.  It is more profitable for Google to run Company A’s more relevant ads, even at half the bid (hence, Google’s emphasis on Quality Score):

The Math of 100 Impressions

Company Max Bid CTR Revenue
A $1 100% $100
B  $2 25% $50

(Let me state the obvious: While 100% CTR and 25% CTR are completely unrealistic assumptions; 10% and 2.5% are not. The math above stays the same, but the revenue to Google rests at $10.00 and $5.00 respectively.  Google also attempts to protect their user experience by biasing these numbers with their quality scores.)

This is where digital agencies that have lost sight of the fundamentals — content management — are losing big time. While implementing a bid management strategy in the scenario outlined above can technically ‘work’ to improve bid position, it is an expensive undertaking that results in poor performance for their clients, which can lead to higher client churn rates.

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The bid management platform’s job is to find the bid amount at which it is more profitable for Google to serve Company B’s ads with the same amount of impressions.  In the case below, that may cost Company B’s clients over 4 times more than Company A’s.

The Math of 100 Impressions

Company Max Bid CTR Revenue
A $1 100% $100
B  $4.01 25% $100.25

While technically the strategy above can result in a better placement for company B’s clients, it comes with a massive overage in cost and is ultimately a disservice to the business that will lead to higher client churn.

To this point, the idea of deploying a repeatable and highly specific Content Management strategy across a large volume of (SMB) accounts while remaining profitable has been considered unattainable by most digital agencies. For this reason, bid management has served as the primary PPC strategy foundation for digital marketing agencies servicing a large volume of SMB customers, rather than as the final finesse tool on a foundation of unparalleled content management.

As you think about your current content strategy, ask these questions to help make sure you’re on the right track:

  • Can we clearly articulate our current content strategy?
  • How do we monitor our current strategy and work to improve its effectiveness?
  • Is our current content strategy limited by the number of strategists we currently employ?
  • Are we relying on individual strategists to make manual content changes?
  • What is the process to ensure parity between our client’s inventory and their ad copy?
  • Do we ever forego content best practices due to limited human capital?

You might find it’s time to revisit the basics, which aren’t basic at all.

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