Paid Search

5 Reasons Why You Shouldn’t Entirely Automate Your PPC Bid Management

 5 Reasons Why You Shouldn’t Entirely Automate Your PPC Bid Management

Oh, the good old talk about bid management software! Lately we’ve seen the addition of a big new player in automated bidding: Google.

With Automated Rules and AdWords Scripts, Google has entered into the bid management software space and they’re doing excellent. I’ve never liked outsourcing the bid management part to a third party provider as I like having my own keyword data in-house and I don’t want to pay an often hefty fee either.

However, implementing automated bid management these days is so easy that many advertisers tend to treat AdWords as if it were some kind of passive money making machine.

In White Shark Media we’ve been contracted to manage several relatively big accounts for small businesses that had been completely relying on AdWords newly automated tools to run their AdWords campaign.  Not understanding why their campaigns didn’t produce results anymore they turned to us.

This blog post is a response to what I’ve seen lately happening when PPC advertisers outsource their bid management process entirely to software.

1) Downward Spirals Following a Bad Week Might Limit Your Potential

In a recent AdWords account that had been using automatic bidding through automated rules I saw a big decline in the potential profits derived from the campaigns.

Granted, there were a lot of good changes made to the bids throughout the 44 active campaigns, but there was also a big amount of mistakes. The account utilized a bidding system for:

  • Increase bids by 10% for keywords with a Value per Conversion / Cost higher than 5 and an avg. pos. inferior to 2.
  • Decrease bids by 10% for keywords with a Value per Conversion / Cost lower than 5 and at least 1 conversion.

On paper the rules above look good. Decrease costs when the keyword isn’t profitable and increase the keyword when it’s being profitable.

The problem with blindly using a bidding system like the one above is that you can easily cause a downward spiral. Seeing that there are no rules in place to “test” keywords, then once you’ve started decreasing the costs for a keyword chances are that you’ll keep decreasing them.

A common scenario for temporarily low conversion rate is a competitor doing a wild promotion that you can’t follow. Your conversion rate and CTR will take a hit for the duration of the promotion, but will recover once the competitor’s promotion ends.

With bidding systems like the one above you might be risking to wait for several weeks until your bids recover to where they were prior to being decreased, if they ever recover.

The bidding for select keywords might be decreased to such an extent that they end up in a low position from where they rarely produce another conversion. All of a sudden previously profitable keywords are now hidden away and the chances to find them again in a huge account are rather slim to none if you don’t have any “red flags” in place.

2) Automated Bid Management Can Skew Match Type Bidding

Broad Match and BMM keywords can be a great way to increase profits and awareness for any AdWords campaign. However, you need to keep the keywords in line. Especially Broad Match keywords can be difficult to work with.

One of the keys to working with Broad Match is not to bid excessively. Whenever Google notices that you’re bidding a Broad Match keyword up to the top 3 you’re granting them permission to further expand your keyword to all possible searches.

I often keep Broad Match keywords in a 4-5 average position and let my BMM, phrase and exact match keywords inhabit the top 3 ad spots. In this scenario, Broad Match keywords have a naturally low cost per conversion and an automated bidding system might bid them higher than wanted if you don’t put certain restraints on them.

 Ad Rank Determines Impressions

It’s well known that the Ad Rank of a keyword determines what keyword is shown if more keywords are eligible to be shown for a given search query.

If your automatic bidding rules have skewed over time your bidding to favor your BMM keywords over the same exact match keywords you can risk seeing exact match search queries being triggered by your BMM keywords.

I’ve encountered many people who didn’t believe this to be that important, but for me it’s crucial to have control over my keywords. If one of my BMM keywords is generating a lot of sales, then I know it’s because of the long tail searches they trigger. I don’t want to mix them up with my exact match keywords.

3) It Might Foster A Passive Attitude Towards PPC Management

A big danger from using anything automatic is that it might enable you to focus less on what actually needs to be done. By using automatic bid management you are essentially relieved from responsibility (either on a conscious or subconscious level).

I’ve talked to plenty of people who have taken my AdWords courses, enabling CPA bidding in AdWords, and what they have done is to lean back waiting for the money to start rolling in.

Think of your AdWords campaign as a funnel. If your ads or keyword selection are poor you will have a very tight exit at the end of the funnel. No matter what your bid management software is doing inside the funnel,  only a set amount of conversions are eligible to slip out of the funnel at any given time.

Contrary to common belief, automatic bidding can’t solve an already broken campaign. Optimally implemented automatic bidding can help elevate the profits from a successful campaign, but it can’t fix what’s broken.

4) Bid Management Software Can’t Gamble Nor Predict The Future

One of my Clients sell bags, backpacks, suitcases, pencil cases, handbags and everything else in between. He has two major sales events in the year: Back to School and Christmas.

These two months are responsible for up to 40-50% of his revenue from Paid Search. Keywords that used to be unprofitable all of a sudden become profitable and ridiculous keywords such as bags in Broad Match become goldmines for profits.

The biggest problem with just leaving your entire bidding process to software is that it doesn’t know anything about predicting the future. Granted, I can’t predict the future either, but I can read in a chart that the conversion rate for 11 campaigns doubled in August, so I know that I can pay twice as much per click in that time frame for the upcoming month of August as well.

Software that’s only counting on historic performance can’t gamble on what will happen in the future and if you don’t take action you will lose big in your bestselling months.

5) Keywords On The Edge Will Receive Lower Bids

Something most experienced PPC professionals know about PPC Management is that the advertisers in the first spot get the vast majority of clicks. This is especially true on Google where top ads are taking up to 70-80% of the virtual real estate above the fold on the average screen resolution.

In mobile this is even more evident as top ads normally fill out the entire screen.

I often encounter keywords that are in an average position of 2.8 in AdWords, but are slightly unprofitable. It’s not a big loss, but it’s enough to make a small dent into the overall results.

The danger about automatically lowering the bid for these keywords is to lose a big part of your clicks by moving out of the top 3 ads. If you’re having 10 sales per day in the top 3 ad spots you can often expect 2-4 sales per day if you’re lower than top 3.

By moving out of the top 3 ad spots you therefore risk losing a lot of the customers that you’d otherwise receive and who could be profitable for you in the future (i.e. retention marketing, newsletters etc.). Another key distinction if you’re barely breaking even in the top 3 spots is to start testing new ads in order to find an ad with a slightly higher conversion rate that will take you to profitability while still being among the top ads.

An automatic bid software will not be able to differentiate when a small loss serves the greater good.

I Love Automatic Bid Management As Much As I Love My Daughter Being Alone In A Room With My Wife’s Birthday Cake

Automatic bid management serves a lot of great causes and can be of big help when optimizing your PPC campaigns. The bigger your campaigns are the higher benefits you might get by using an automatic bid management tool.

As with a lot of things from Google, just because something is called automatic, it doesn’t mean that you should release all responsibilities and let Google or a third party manage things on your behalf.

An automatic bid management tool can and will save you time, but it will not take the entire process of bid management away from you. Instead of managing individual bids you need to focus your efforts on building and managing bidding rules. Only by combining your own efforts to the granularity of automatic bid management  you will reach the best results.

 5 Reasons Why You Shouldn’t Entirely Automate Your PPC Bid Management

Andrew Lolk

Co-Founder at White Shark Media at White Shark Media
Andrew Lolk is the author of the 189-page free AdWords ebook The Proven AdWords Strategy. He's worked in AdWords since 2009 and have co-founded White Shark Media; A leading Search Marketing agency and Google AdWords Premier SMB Partner.
 5 Reasons Why You Shouldn’t Entirely Automate Your PPC Bid Management

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7 thoughts on “5 Reasons Why You Shouldn’t Entirely Automate Your PPC Bid Management

  1. If you are a big dude – like jcpenny, amaazon etc – I think you should have automated robots running your show but anything smaller than those type of web portals – I think your process should be a 100% human fingers.
    your pal,
    Chenzo

    1. Hey Chenzo,

      Without a doubt – but advertisers a lot smaller than JC Penny, Amazon etc. should also use automated bidding. Especially now that you can set up rules and create AdWords Scripts without having to pay 5-10% of your budget to a third party software should automated bidding be used by many.

      The important aspect is just to insert your own thoughts and still actively manage/monitor your bidding even though you have a system managing the day-to-day activites.

  2. Good article, it raises issues that I have often thought about and PPC account managers need to be aware of them.
    Unfortunately in agency environments where an AM may have several clients and little time bid automation is seen as the only option and is not monitored sufficiently.

    1. I couldn’t agree more.

      Bid management software or automated rules can work very well though, but it’s just important that the AdWords managers still have a say in the matter.

  3. Great article. It’s always a hard balance between software and human management, but I think you give a great explanation. Human planning and strategy can really see broader strokes and trends, while automatic management can give due diligence that human marketers just don’t have time for.

  4. Great post Andrew! I also believe that having a completely automated bidding system may end up doing more harm than good because in many cases it tends to reward the keywords that have a lower CPA and punishes the ones that don’t. It doesn’t actually fix the problem. The human intuition that gives keywords on the edge a chance is important.
    Also, just altering bids can’t help achieve your CPA goals. Systems don’t seem to take into account the keyword-ad text-landing page relevance and what happens after the click. If the ad doesn’t lead to the right landing page, conversions will always be low and CPA high irrespective of bids.