Assessing Keyword Bidding Complexity by Rob Cooley

@OptiMineInc, #SMX, #14D

Assessing Keyword

Bidding Complexity

Presented by Rob Cooley, CTO, OptiMine Software

Copyright © 2013 OptiMine Software


OptiMine Background

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• New standard for digital advertising measurement and optimization

• Paid search and display advertising channels

• Conduct complexity assessments for every prospective customer– Process refined through hundreds of assessments



• Bid optimization will make or break paid search ROI

• Using the appropriate optimization technique is critical to maximizing ROI

• Understanding keyword bidding complexity will determine the best optimization method

• Program and market dynamics require periodic assessment of bidding complexity to remain competitive

Why Keyword Bidding Complexity Matters

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Goal: Optimizing paid search financial performance

• Four-part framework for assessing complexity

• Step-by-step guide through the assessment process

• Everything you need to complete the assessment

• Determine if there is room for improvement through bid optimization

What You’re Going to See

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• Current performance

• Program size

• Conversion coverage

• Bid optimization potential

Complexity Assessment Categories

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• Goal– Financial-based or order-based

• Where you are today– How far above or below the goal

• 12-month trend– Direction and slope

Understanding Current Performance is Critical

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• Proper bid optimization can increase financial results:– By 50% or more - 40% of the time

– Between 25-50% - 40% of the time

– Less than 25% - 20% of the time

• For example, assuming 25% increase:– Current revenue $1,000/day; typical expected increase of $250/day

• ROAS held constant; cost increases by same percentage

– Current cost per order is $100; typical expected reduction to $75 CPO

Range of Expected Improvement

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• Keyword-level conversion tracking (e.g., Google Adwords)

• Google or Bing Keyword Performance for last 90 days– Include average position, impressions, CPC, cost, clicks, and conversion

events

• If conversion tracking outside of Google or Bing, pull keyword report from your tracking tool using metrics listed above

Performance Reports Needed

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• Keyword count with impressions– How many keywords receive impressions

• Daily conversions– How many conversion events

– You define conversion (e.g., orders, bookings, leads, etc.)

Program Size

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567

23852835663

18 68

3,125

1

100

10000

1000000

Account1 Account2 Account3

Keywords

Conversions



Program Size Metrics

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Complexity Rating

Metric Low Moderate High

Keyword Count with Impressions <5000 5000 - 50,000 >50,000

Daily Conversions <20 20 - 100 >100



• Coverage - Percentage of conversions driven by top 100 converting keywords

• Regular Converters - Percentage of cost coming from keywords with 1+ conversions per month

Conversion Coverage

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1

0.70

0.040.26

0.60

0.86

0

0.5

1

1.5

15k Keywords 2k Keywords 733k Keywords

Top 100 Coverage

Monthly ConverterCoverage



Complexity Rating


% of Conversions from Top 100 Converting Keywords

>75% 50% - 75% <50%

% of Cost for Keywords with At Least 1 Conversionper Month

<33% 33% - 66% >66%

Conversion Coverage Metrics

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• Average position

• Seasonality - Ratio of highest-cost month to average month from last 12 months

• Value per click (VPC) variability

Optimization Potential

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1.2

2.3

4.6

1.071.8

3.5

0

1

2

3

4

5

Account1 Account2 Account3

Position

Seasonal Ratio



• If every keyword has roughly the same value per click, then determining the right cost per click (aka bid) is fairly simple

• How to calculate– Download a keyword-level performance report that includes conversion

rate and load into Excel

– Filter out keywords that have no conversions

– Calculate the average and standard deviation for the conversion rate column

– Divide the standard deviation by the average

Value Per Click (VPC) Variability

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Keyword Match Type Conv. Rate Conv. Rate Conv. Rate

Jewelry Broad 1.3% 1.3% 0.2%

TUNGSTEN RINGS Phrase 1.1% 5.4% 28.3%

gold hoop earrings Phrase 1.3% 0.5% 0.6%

cz jewelry Broad 3.6% 1.1% 0.3%

red coral jewelry Broad 3.2% 2.2% 0.5%

amethyst necklace Broad 2.9% 0.4% 1.1%

diamond rings Broad 1.8% 6.8% 1.3%

jewelry Exact 0.9% 0.8% 0.5%

white gold earrings Broad 2.6% 0.2% 0.3%

men's diamond bands Broad 2.3% 7.8% 0.4%

Average 2.1% 2.7% 3.4%

Standard Deviation 1.0% 2.9% 8.8%

Variability 0.45 1.1 2.6

VPC Variability Examples

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Complexity Rating


Value per Click Variability <1.0 1.0 - 2.0 >2.0

Average Position Higher than 2.0 2.0 to 3.0 3.1 or lower

Ratio of Highest-Cost Month to Average Month <125% 125% - 200% >200%

Optimization Potential Metrics

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Bidding Complexity

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Complexity Rating

Topic Metric Low Moderate High Weight

Program Size Keyword Count with Impressions <50005000 -50,000

>50,000 1

Daily Conversions <20 20 - 100 >100 3

Conversion Coverage

% of Conversions from Top 100 Converting Keywords

>75% 50% - 75% <50% 2

% of Cost for Keywords with At Least 1Conversion per Month

<33% 33% - 66% >66% 2


Value per Click Variability <1.0 1.0 - 2.0 >2.0 3

Average Position Higher than 2.0 2.0 to 3.03.1 or lower

3

Seasonality <125%125% -200%

>200% 1



Step 1: Determine complexity level for each metric • Low = 0

• Moderate = 1

• High = 2

Step 2: Multiply metric complexity by weight

Step 3: Add weighted scores to determine overall complexity

Finding Your Complexity Rating

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Category Metric Value Score Weighted Score

Size Keywords 1844 0 0

Conversions 2 0 0

ConversionCoverage

Top 100 90% 0 0

Monthly Converter 30% 0 0


Position 2.2 1 3

Seasonality 3.5 2 2

VPC Variability 0.9 0 0

Total Score 5

Example 1: Low Bidding Complexity

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Example 2: Medium Complexity

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Size Keywords 22,144 1 1

Conversions 36 1 3

ConversionCoverage

Top 100 80% 0 0



Position 3.3 2 6

Seasonality 1.3 1 1


Total Score 18



Example 3: High Complexity

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Size Keywords 217,952 2 2

Conversions 169 2 6

ConversionCoverage

Top 100 40% 2 4



Position 3.5 2 6

Seasonality 4.5 2 2


Total Score 28



• Assessment categories– Current performance

– Program size

– Conversion coverage

– Optimization potential

• The higher the complexity, the more likely bid optimization will improve performance

• Periodic reassessment recommended– Especially after major changes to your paid search program

Wrap-Up

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Bidding Complexity Metric Summary

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Category Metric Report Formula

Program SizeKeyword Count with Impressions

Keyword Descending sort by impressions, find row number with first 0

Daily Conversions KeywordMouse over conversion column, divide sum shown at bottom by

number of days in report

Conversion Coverage

Top 100 Converting Keywords

KeywordDescending sort by conversions, sum conversions for first 100 rows,

divide by sum calculated above

Cost for Monthly Converters

KeywordKeep sort order from above, sum cost for keywords with >1 conversion per month, mouse over cost column to get total cost, divide monthly

converter cost by total cost


Average Position Keyword Overall reported average position

VPC Variability KeywordRemove keywords with 0 conversions, create new VPC column by

dividing conversions by clicks, use average and stdev functions, divide stdev by average

Seasonality CampaignSegment by month, display cost in graph, mouse over highest point to

get max cost, divide total reported cost by 12 to get average. Divide max by average to get seasonality



OptiMine Software

Web: OptiMine.com

Twitter: @OptiMineInc

Facebook: Facebook/OptiMineInc

Phone: 877.598.3282

Thank You

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Business

Assessing Keyword Bidding Complexity by Rob Cooley