Reprinted with permission from the Lyris.com blog archives.
By: Dane Christensen and Daryl Michalik

In Part 1 of this two-part blog post we discussed the four main reasons why adjusting bids based on real-time data is an effort in futility. Today, let’s consider two key types of search engine marketing objectives, and illustrate why real-time bid management is irrelevant for both.

Direct Marketer

If your primary objective is to maximize the ROI of your paid search advertising, then you are a direct marketer. Whether you are directing visitors to an ecommerce site or collecting leads, you probably have a budget with which you are trying to generate the most revenue or leads.

As we discussed on Wednesday, you can’t collect enough data about conversions within a short time span to make short term moves, so you can’t make bid adjustments based on your primary key performance indicator. And, making bid adjustments based on your CTR is really just as futile. Both tactics assume that you could change your CTR or conversion rate by adjusting your position at a given point in time, and that just isn’t necessarily true.

Because your cost per click generally declines with position, it’s true that you will generally have an optimal position that maximizes ROAS or minimizes cost per conversion. Making daily adjustments to your keyword bids is certainly frequent enough to move you into your most profitable position and keep you there.

Brand Marketer

If you are a brand marketer, meaning you want to establish yourself as the owner of a given category by dominating the top position regardless of cost, then the scenario is even simpler, and real-time bid adjustment is even less relevant.

Just bid high – as high as it takes to gain top position. Bid $99 if you want to. You won’t have to pay it. Google will drop your CPC down to just above your nearest competitor, and you’ll pay the least amount necessary to secure your position. Still, keep in mind that you may not always show up in the top position. Google may only charge you a fraction of your bid price and still occasionally put your competitor ahead of you. Don’t ask why. Just chalk it up to the “algorithm”.

Of course, you want to own a category/keyword while also paying the lowest amount possible. But you won’t achieve that through real-time PPC bid management. Bid high and make your ad and landing page as relevant to the keywords and as high-quality as possible. The algorithm takes care of the rest.

The only other factor you might be thinking about is your competitors’ bids. You want to respond instantly and jockey for position. But this tactic assumes that your competitors are also adjusting bids on the same keyword you are tweaking at the same time. Given that you probably have hundreds or thousands of keywords and so do they, the odds that you will both be bidding against each other on the same keyword at the same time are quite remote. Again, the point is not that you shouldn’t work to achieve a certain position. It’s just that the sense of urgency is simply unnecessary.

Your Team Will Still Be Busy, Just on Higher Value Activity

Does this mean that you should not bother with a bidding strategy and just let the chips fall where they may? Of course not. You should stay on top of your bids and make ongoing adjustments if necessary. You just don’t need to do so in the reactive mode that might have helped in the early days of PPC; that has since become irrelevant.

The advent of the Google AdWords model as the standard for PPC search marketing has made managing your campaigns less like darting around on a jet ski and more like navigating a large ship. This analogy is not about the size of your budget but rather about the nature of the system itself. It’s a much more complex system with layers of algorithmic functions that modulate the often erratic actions of its users. You still have the ability to steer your campaigns in more profitable directions, but it is now a more strategic process rather than an endless series of tactical maneuvers.

While the AdWords system certainly isn’t perfect, Google has invested an incredible amount of effort into developing a sophisticated system that determines the most efficient set of results for all parties concerned (including the searcher, the advertisers, and Google itself). It wasn’t designed to be easily manipulated. So if you try to outsmart the Google engineers, you’re sure to expend a great deal of energy and have few results to show for it.