4 Best Practices to Building a Better Bidding Strategy with Volume-Based Optimization

Maria Breaux
May 8, 2015

While algorithmic bidding certainly helps advertisers meet their goals for individual keywords, it may not necessarily result in maximizing profit for the overall collection of keywords. In order to achieve maximum profit, advertisers should consider utilizing a volume-based optimization strategy that has all keywords working together. What this means is that rather than managing keywords individually, volume-based optimization has all a marketer’s keywords working together. This way, instead of depending on one keyword to help a marketer reach their ROI target, all the keywords in a set are working together to reach that target. The volume-based optimization approach is particularly geared toward driving gross profit. When there is an extra dollar to spend, volume-based optimization will determine which keyword(s) will provide the highest revenue in return.

Volume-based optimization is most effective when applied to the head terms of a given set of keywords. The large amount of historical data associated with head terms means that volume-based optimization can more accurately assess how much to invest in each keyword.

Here are some best practices for utilizing volume-based bidding strategies:

1. Don’t neglect tail terms.

While head terms are generally more visible, tail terms make up the majority of searches. Unfortunately, tail terms generally don’t have much historical data available. To overcome this obstacle, leverage Bayesian Estimation to predict performance and estimate bids for tail terms. In combination with volume-based optimization, this is the most comprehensive and insight-driven approach for maximizing overall profit.

2. Take unexpected factors into account.

Unexpected factors, such as website downtime, can have a huge impact on performance. Utilize a bidding tool that allows you to exclude any outliers from the historical data used to calculate bids, such as Marin’s excluded dates feature.

3. Plan for seasonality.

Bidding tools can also be helpful when it comes to planning for seasonality, including sales and promotions. Using a feature like Marin’s Dynamic Actions, advertisers can automatically apply a percentage boost to any campaigns or groups that fit their pre-designated criteria. This automated handling of user-specified criteria ensures that advertisers never miss a chance to increase visibility during crucial seasonal events.

4. Incorporate external data.

Knowledge is power, and the old adage is especially true when it comes to bid management. Using sophisticated tools, advertisers can harness the power of their data warehouses and third-party data feeds to build flexible rules that adjust bids based on trends in contextual data. For example, an advertiser using Marin could bring inventory data into the platform and use it to automatically boost bids for keywords with high inventory. Other use cases include setting bid overrides, bid caps, and bid floors based on fluctuations in the data. By leveraging external and contextual data, it is possible to make smarter and more informed bids.

In addition to these foundational elements of bid management and optimization, advertisers should also consider a host of newer factors. In particular, budget forecasting, audiences, and mobile have become critical components of successful search advertising programs. To learn more, check out our latest white paper, Bidding and Optimization Strategies for the Modern Search Marketer.

Additional thoughts? Leave them in the comments section below.

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