Winning a Bid War

Feb 27, 2006 - 4:02 pm 0 by

Moderated by Chris Sherman, Search Engine Watch

Intro: SEM’s have the perception that they are in control of their own destiny, but reality shows that the others who are competing for your terms actually will guide your strategy. The focus of the session is how to approach bidding strategically. Larger room…nearly full.

Krisopher Jones –

Effective bid strategy is essential in the SEM marketplace. Developing an automated approach to diffusing bid wars is essential. The most effective way to combat bid wars is to use automated ROI-based bid management software. Bid war tactics are ROI-based bidding, “bid jamming,” “bid surfing” and “bid shadowing.” Keep in mind that Google and Yahoo provide subtle differences.

ROI-based bidding: This strategic approach allows for systematic update of bids based on a specified ROI objective. While this isn’t used to compete with any specific competitor, this works very well because it focuses on ROI. Bid Jamming: repeated bidding one cent below competitor in order to force them to pay highest max bid. Is this fair? Answer is yes, because top competitors will do this to you. Shows an example of a bid one penny below the #1 advertisers, being the “bid jammer.” Advertiser #1 is thus being “jammed.” Recommends that you use this effectively in conjunction with ROI-based objective. Use only for a highly desired set of keywords. Use bid jamming to diffuse a situation by bidding third right below another bid jammer.

Bid surfing: when you strategically choose positions based on “gaps” in the bids. The “bid surfing” tactic is essentially a way to get the best value for your clicks, avoiding two or maybe three competitors involved in a bid war. Recos: an effective way to maintain top placement at a discount. Also good to use for highly competitive words.

Bid shadowing: when you choose and maintain a bid position above or below a competitor. Recos: use bid shadowing to reduce expensive trial and error typically associated with launching new and untested kws. If you are a small or medium size advertiser, the shadowing technique allows you to follow their leads and hopefully enjoy some of the successes they are.

As the SEM climate becomes more competitive, a search analytics-guided campaign will help you to be more sophisticated. The sophisticated and the aggressive advertiser will survive and thrive. If you are the victim of bid wars, the way to improve is by being more sophisticated and aggressive.

Martin Fleischmann –

“Know what winning is worth” or “to thine own self be true.” What is a bid war? Just increased competition on a particularly popular terms that you could “get hurt on.” Describes how manages bid spend manually. They regard bid management as their core competence. They have some proprietary tools, and have not adopted any tools available on the market today, even after testing.

War or no, you can never fly blind. You control: Bidding and creatives. Cyclical variables: Time of day effects and day & seasonal effects. You need to understand these. These combined drive your rank order, and what your conversion rates are. You need to solve all these based on cost per lead and lead volumes, based on revenue per yield (yield) by product, and the capacity/volumes needed to perform optimally. You cannot control competitor tactics and styles, but you need to understand how to react to that. Another uncontrollable issue is fraud, specifically affiliate fraud. They instantly let the portals know about this, but sometimes slow in reacting. Know your metrics in real time.

Tools: great for stable situations, but need to be diligently overseen in order to add intuitive skills and fast reaction time. You cannot win a dogfight on autopilot. Some bid management tool promises versus realities: Promise: tools manage all vs. reality: doesn’t. Promise: Tool reacts non-emotionally vs. reality not proactive or intuitive. Promise: Watches bids often vs, reality: doesn’t react fast enough. Promise: makes good decisions vs. reality: doesn’t.

Prioritize your attention by spend/term. High searches plus high clicks equals easiest possibility for fraud. Know your basic search algebra CPA, profit, etc. Know your variables, and know your competitors. Do they have a huge budget to burn? Are they trying to scare you?

Possible situations: 1. Competitor jumps way over everyone, gets aggressive. Possible tactics toe-to-toe, “penny them”(bid jamming), or push them up further then stay right underneath them. A lot of times if people see that you are watching, they will quickly chose not to fight. 2. Main competitor starts rising: preemptive strike, or cooperate then go up later. 3. Entrance of new competitors: push strongly, engage in a war of attrition, or let others fight the battle. People start to drop fast: look out for affiliate fraud.

Golden rules: think long term. Don’t click on competitors, don’t encourage affiliate fraud, your competitor could end up being a partner later. Understanding leads to respect, which can in turn lead to “coop-etition” instead of competition.

Anthony Muller –

Will share a case study. “the Art of Bid War.” WD Music – m28 year veteran in guitar parts industry. Zensem uses a rev share partnership deal with them. Launched in May 2005 with PPC campaign budget of $2000. They decided to start by doing competitive research. Categorize them and find their strengths and weaknesses. 2 categories: heavy competitors, and smaller competitors. Heavy were bidding on majority of terms. Listed strengths and weakness and found that they had the ability to “bury them” due to budgets. They found that their keyword lists were possibly a weakness because it was such a huge list and hard to manage. Then they looked at their own strengths and weaknesses, and found that the company was flexible, but “an army of one,” incapable of affording tracking. Once they got data to study, they found some areas to take an aggressive stance in the battle. They decided to target high margin terms and dominate them using bid jamming and bid domination.

Battle tips: used their automation against them, use their kw list against them, made sure getting a return, think about long term (winning the war not just the battle), protecting themselves from getting jammed. This helped the bid prices creep down, competitor ads going down midday/late day, competitors completely stopping bidding on some terms.

Stephen Anderson – Rock Coast Media

Two case studies: Money Management Intl. (MMI) and Eastern Mountain Sports (EMS). Most importantly: have to know your goals going into the campaigns. Have to look at your site’s usability/conversion pathway. Know your competition, you may or may not be in a position where you can bid against them.

MMI: “Wrestling Gorillas.” They found when they entered into the space that the advertisers were bidding way above the market on particular terms, often times in “big round numbers” which indicates to him “laziness.” Background: clear and aggressive CPA and volume objectives. They knew that a very small portion of the kws were going to drive the success of the campaign. Unfortunately, the gorillas were there too. War strategy: Customized landing pages for each kw group. Also implemented automated bid strategy to “reign in gorillas.” Frequently updated bid schedule- focus on high-converting times of day. Manually reviewed placements.

Strategy tip: be very careful with Yahoo. They have a thing called “budget smoothing,” which removes listings randomly during certain times of day or moves them into different positions from what is shows within administrative. Results: within 2 weeks, volume increase by 20% and CPA’s dropped, and some gorillas were completely gone.

MMS: “Ready for the Holidays.” All of a sudden the whole bid landscape was turned over due to the arrival of the holidays. New holiday bid strategy included: adjusted ROAS goals, and they sacrifice a little efficiency for volume. Low volume/high efficiency tactics still employed also and spotchecked often. Switched between bid jamming and not bid jamming – again spot checking often. Results: revenues doubled from week 2 to week 5. There was a slight efficiency sacrifice, but it made up for it in volume. Once holidays ended, many of the competitors were gone. Some of them may have left due to bid jamming, which is sometimes “satisfying.”

When all else fails: go for the heart. They had a competitor that called their client and gave them a sob story, which caused the client to call him and ask him to adjust strategy and be “nicer.” (Yechhh…)

Q&A: will increased use of bid management software cause for an increase or decrease in overall pricing? A number of factors involved in that…not just bidding, but also the ability of the site to convert. As sites improve, this will also affect bid management. The one who gets better returns “wins” and can pay more. Chris Sherman ads that so many people are focused on analytics and conversion, but people are entering the game that only want a brand impact, and thus may not care about ROI or ROAS. Must be aware of people getting into the game that are changing the rules regarding bidding, since they essentially just want the number one spot to help reinforce their brands.

This is part of the Search Engine Roundtable Blog coverage of the New York Search Engine Strategies Conference and Expo 2006. For other SES topics covered, please visit the Roundtable SES NYC 2006 category archives.



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