Your SEM Bid Management Solution: it’s a ‘Turk’

By Rich Devine | 1 Comments | Posted in in Analytics , Marketing , Optimization , Search | Permalink

Technorati Tags: agency, bid management, efficient frontier, google, Ken Jennings, kenshoo, marin, media agency, paid search, search agency ad agency, sem, seo, turk, zaaz

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In 1770, Johann Wolfgang Ritter von Kempelen invented an automaton chess-playing machine affectionately known in modern times as "The Turk". For more than 80 years the 'machine' toured Europe and the Americas, defeating most of its opponents -- including Napoleon and Benjamin Franklin.

In 1820, Surprise! As if anyone didn't know, the chess-playing Turk was exposed as a hoax, a parlor trick, powered by humans stuffed inside the machine -- not automated by the machine itself.

Bid Management software is a 'Turk'. It's not that Bid Management isn't necessary, or helpful, or effective -- but if an agency is trying to sell you based on how awesome their 'proprietary' bid management software is, or how they've cracked some special code and have super-top-secret algorithms that make their bid management software smarter than Ken Jennings, take a pass.

Bid Management is a Turk, only as effective as the human being who is inside the box pulling the levers.

Don't misunderstand me. I am a big believer in bid management software. I recommend it for most of our clients, and there are some really, really good solutions in the marketplace -- some of them almost as smart as Ken Jennings.

Bid management is attractive for two reasons:

First it has the capability of processing information really fast, smartly predicting bids, and executing real-time optimization decisions that can result in added efficacy for your SEM campaigns.

Second, it offers tremendous efficiency. Multiple publishers can be managed from one single platform. Thousands of keywords, budgets, and bid decisions can be automated based on configured rules and parameters.

Clients get excited by the prospect of added value to their business and increased ROI from their ad dollar. Ad agencies get excited because they can provide services at some fraction of the human resourcing cost that SEM would otherwise demand.

The problem is that bid management is really just a Turk. In order for Wolfgang's chess robot to beat most of it's opponents like a robot should, he had to find world class chess players to sit inside the machine. So it is with bid-management software: while useful and even superior to humans for many automated functions, unless it's powered by a skilled human operator -- it just doesn't work very well.

Sometimes (actually lots of times) agencies get a little over-enthused by the prospect of profit margin and they skimp on the quality of human resourcing necessary to make it work. They buy into the myth of the Turk.

So when you're ready to hire an agency here are some things to look for:

1. They should have a bid-management solution. If they don't, I'd move on. At ZAAZ, I've had my team build familiarity with multiple tools -- some of which are better solutions for some clients than others. I really believe that there's an 80/20 rule here: without bid management you spend 80% of your time doing admin functions for paid search, and only 20% of your time doing strategy. With bid management, it can be the reverse. But the operative word is 'can'.

2. They should talk about their people. They should spend more time talking about the value and intelligence of their people than the magical value of the machine. If it's all about automation, algorithms, and predictive intelligence -- I'd take a pass. I can't tell you how often I'm in a new pitch, and the incumbent agency has deployed a great bid management solution; but they've thrown in a low-cost intern or a project manager with no time to spare and no real search experience. It just doesn't matter how awesome that machine is, without a good human to operate it, the venture always turns into a big mess.

I have a basic rule that surprisingly isn't always obeyed by others: I don't hire people to play chess unless they know how to play chess. Yes it costs me more to hire good people, but I have significantly lower churn on my clients, and my clients are happy.

3. Pricing should be transparent. If you can't tell what you're paying for between human contribution and software contribution -- take a pass. Bid Management software is usually priced at a percent-of-spend fee. At ZAAZ I've elected to take whatever volume discount we earn as an agency from bid management partners and I pass-through the discounted fee directly to my clients. Then I'm extremely transparent about what kind and how much human effort is required to make that Turk work.

this blog post originally appeared at RichDevine.me