Recently Google announced their new SERP results layout. Google has recently removed the right hand side of “sponsored ads”. You’ll notice that the right side of the screen is now empty, whereas before there used to be about seven ads for highly competitive keywords. Since that update many folks have panicked and have adjusted their strategies to secure one of the top 4 allocated spots.
Larry and Sergey, want Googlers to have an elegant user experience, and to them, Google has always been about showing the most relevant content to each user based on the context of what Google knows about them; which is quite a lot…
At the same time, Google makes about 96% of their revenue through advertising revenue. The balance Google plays between providing a terrific user experience and maximizing ad revenue is a constant struggle for a publicly traded company that at its core is an advertiser.
The pendulum recently shifted in favor of the user in this latest change. With fewer paid placements on search result pages advertisers are scrambling to update their day-to-day pay per click bid management rules to try and secure the top spots. For those that do this manually, it is a tremendous effort, and with so much volatility in keyword auction prices, pricing is clearly not stabilizing. We are seeing that Google continues to experiment with various layouts and bidding logic behind the scenes so it’s going to be some time before the new bidding rules that advertisers may craft are going to require constant care. But rules-based, keyword bidding is so 2000’s.
Those advertisers that are using portfolio based, keyword bidding tools will have the upper hand. Specifically, for Adobe Media Optimizer (AMO) customers, the volatility is a welcome landscape to flex its advanced analytics muscles. Advertisers using AMO can sleep well at night knowing that AMO’s Modern Portfolio Theory or MPT algorithms are set up to handle even the most volatile SERP changes. Keep in mind that the underlying equations were originally built to optimize return and risk for another auction, the stock market.
This chart shows how the math is applied to various stocks to optimize the portfolio of stocks as represented by the dots within the parabola below. Those portfolio combinations on the edge of the parabola are the optimal points between return (as shown on the Y Axis and risk, as measured by Beta/ volatility on the X Axis).
Economist Harry Markowitz introduced MPT in a 1952 essay, for which he was later awarded a Nobel Prize in economics.
Bringing AMO to the party is like bringing a tank to a knife-fight. Those still running manual and rules-based campaigns will be left paying much higher amounts for their paid search.
AMO is equipped to handle any changes Google throws our way, and as pay per click managers, we know AMO will continue to handle hundreds of thousands of keyword bids per day to optimize for conversions. We have some customers that the system is running over 150,000 keyword, ad and placement variations every day. No team of digital advertisers could keep up with that kind of experimentation, analysis and research.
“Keywords in our algorithms are modeled by bids and their effect is on number of impressions, clicks and revenue, not position.” Sid Shah, Director of Business Analytics, Adobe Digital Business.
The self-correcting models AMO generates is a feature no other pay per click platform can offer across search, social and display. That’s one of the reasons that Lima Consulting Group selected Adobe Media Optimizer as our singular platform for running paid search, social and display ads for our portfolio of paid search customers.
In the short-term, anyone using manual or rules-based platforms to manage their Google ad spend will lose the Google battle to those that are using programmatic engines that use portfolio based algorithms. The winners of this battle are those that are able to adapt to the volatility in the most efficient way possible. Agility wins.