Bid Management May Not Be A Commodity -- But It's Not A Differentiator

By Aaron Goldman, VP, Marketing & Strategic Partnerships
Appeared in MediaPost's Search Insider

I was planning on using this column to weigh in with predictions for 2009, but fellow Search Insider Steve Baldwin called me out, so I feel compelled to respond -- lest my POV (to paraphrase reader Steve Plunkett) be branded as the bid management version of "SEO is not rocket science." Lord knows I don't want anyone making a contest out of me.

Steve Baldwin took exception to an offhanded comment in my SIS Buzz-o-Meter analysis referencing bid management as a "commoditized piece of our business." He said this statement is "completely wrong-headed and reinforces a dangerous myth about SEM agencies, which is that there are few meaningful differences between them."

What We Have Here is a Failure to Communicate

I suspect we're arguing over semantics here but it's worth playing out. First of all, the case I was making is that bid management tools, not SEM agencies, are becoming increasingly undifferentiated. In fact, it's arguments like Steve's that equate SEM agencies to mere bid management providers that perpetuates the myth that we're all the same. He even used a disclaimer that he works for "a company providing bid management services." If that's how his firm's positioning itself in the market, no wonder Steve's worried about bid management being labeled a commodity.

Now, before going any further, let's turn to Wikipedia. After all, if Wikipedia says it, it must be true. Wikipedia defines a commodity as "anything for which there is demand, but which is supplied without qualitative differentiation across a market... Commoditization occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently."

In hindsight, I acknowledge that I was flip to label bid management tools as commodities. Assuredly, not all platforms are created equal and there's a wide variance in features and benefits across the various technologies. That said, while bid management may not be a commodity, I don't believe it's a differentiator, either.

Who You Callin' a Tool?

Any search management technology can automatically update bids based on pre-set parameters -- eg, CPA goal of $15 or Position Rule of 3. To Steve's point, the frequency of updates and flexibility of rule-setting varies from tool to tool. However, the mere ability to move bids up and down across multiple engines is not a differentiator. How you deploy bid management tools is the differentiator -- both for SEM agencies and third-party technology providers.

Let me be clear -- there's a marked difference between bid management tools and campaign management tools. This is what I think Steve's getting at when he made his point about the customization of bid management systems. So, again, we may just be having a debate over semantics here.

At my company, we decided not to build a bid management tool. Rather, we invested in the development of a proprietary technology (aka campaign management tool) that overlays 3rd-party bid management tools and allows us to customize the data inputs and reporting outputs while incorporating workflow features.

Why did we go this route? Well, there are a host of tools that are widely available, if not commoditized, to automate the bid management process -- DART Search, Omniture Search Center, Atlas Search, SearchIgnite, Kenshoo, Clickable, Marin Software, Efficient Frontier, etc. Different tools are better fits for different clients. As Steve mentioned, "different search marketers have different business models and success metrics." The key is leveraging the tool that's going to meet the need (and budget) of the client within the context of your overall search strategy and campaign management process.

The fact is, if you were to ask each of the technology providers I just named what sets their tool apart, few would say it's their bid management algorithm. Instead, they'll show you how their tool enables keyword expansion, continually pans for dead links, imports competitive intel into the dashboard, provides cross-channel tracking, etc. Accordingly, these folks wouldn't call their tools bid management technologies, rather search campaign management systems. The ability to automatically update bids is a baseline price of entry for these platforms, not a differentiator.

The Human Element

Regardless of what you call them, technology tools alone cannot manage a marketer's search program. If they could, all SEM agencies will be put out of business when Google makes DART Search free. (Note: I have no insider knowledge on this topic -- it's pure speculation on my part.) Need I remind you of Wikipedia's definition of commoditization as "the diffusion of the intellectual capital necessary to acquire or produce it efficiently?"

Ultimately the value prop. for SEM agencies (and differentiator between them) is their people, processes, and technology. Bid management tools only check one of these boxes. Campaign management tools can check two. Without humans to decide what bid management rules to set or campaign management features to activate based on a marketer's business goals, the tools themselves are worthless.

Bid (and campaign) management tools cannot determine the appropriate weight to be given to various onsite action events nor can they determine the proper level of attribution for other media placements. Technology can't tell you to take the copy points from search ads that are performing well and incorporate those into banner or print ads. Tools can't decide to override an algorithmic bid rule set to maximize sales to support a new promotion running with heavy TV exposure.

Clearly I've just scratched the surface on the value humans provide but, just as Steve ran out of room listing the factors by which bid management tools are differentiable, so have I for what makes SEM agencies differentiable. Hopefully though, I've demonstrated that the former is not a differentiator for the latter.

Here's to continuing the dialogue (and tightening up the verbiage) in 2009... Cheers!

P.S. If you're interested in my '09 predictions, see this post.


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