Is there a future for bid managers in contextual advertising?
Many advertisers believe that with the advent of ready-made strategies with manual bid management for Yandex.Direct, the relevance of bid managers is a thing of the past. Unfortunately, I often meet such an opinion, including among my colleagues in the market, whose opinion I value and respect.
This attitude not only grieves me as a staunch supporter of bid managers, but also seems to be not sufficiently substantiated. Therefore, we decided to conduct our own research and reasonably answer the question whether bid managers are really needed if there are ready automatic Yandex.Direct strategies? The result of our work, I presented at the Autumn Session on contextual advertising. Below I publish the results of the study.
Advertisers with the highest CTR bid are placed in special placement. Inside this block, advertisers are ranked in descending order.
The cost of entry in the special placement is determined by the closest advertiser who did not get into it.
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To begin with, let's look at the principles of the Yandex.Direct auction.
Take an auction in which four advertisers participate. Imagine that all participants are advertised for the same phrase, but have different maximum bids and CTR . The remaining parameters will be taken as equal.
All advertisers work on the “ Highest Available Position ” strategy:
According to Yandex.Direct Help, special substitution will receive ads with the highest CTR bid. In the ad block will be arranged in descending order of the maximum bid.
Based on this, assume that our advertisers will take the following positions:
In fact, the product of the CTR for the maximum bid can be understood as the average earnings of the system on displaying one advertiser’s advert when writing off the maximum bid. Let's call this indicator "Possible profitability of the advertising system."
Each contextual system seeks to get as much profit as possible. From the table it is clear that even the second bid could not help advertiser D to get into the special placement block, since it has a low CTR, which means that the possible profitability of the system from this advertiser will be lower than from the rest.
With how to be in the block, we figured out. Now let's see how to calculate the minimum cost per block for each advertiser.
Since the system seeks to maximize profitability, it must earn on each advertiser who was in the block, no less than those who did not get into this block.
In our case, the advertiser D turned out to be outside the special placement. We can assume that you can calculate the cost of entering the special placement as follows:
The cost of entry in the special placement for the advertiser X = CTR D * D / CTR rate X + 0.01 cu where X - advertisers A, B, C. Ie Entry cost is determined by the closest advertiser who missed it.
At the same time, it doesn’t matter what strategy the advertiser X uses - “Display in the block at the lowest price” or “Highest available position”.
Thus, we obtain the following parameters for the cost of entry in the special placement for each advertiser:
The strategy does not guarantee getting to the desired line of special placement.
Manually controlling bids, you warm up the auction and pay more.
Let's change the conditions: advertisers A and C are switching to the strategy “Display in a block at the lowest price”. In this case, C will take the first place, A will take the second place, and advertiser B, who will remain faithful to the “Highest available position”, will be shown on the third line:
In the end, oddly enough, the advertiser will be shown at the entrance to the special placement, who chose the strategy “The highest available position”, and two advertisers with the strategy “Show in the block at the lowest price” will take first and second place.
And this does not go against the rules of Yandex.Direct. In the Help, it is said that the strategy “Display in the block at the lowest price” does not guarantee getting on the last line of special placement.
Consider another example. At this time, all advertised on the strategy "Display in the block at the lowest price," and the CTR are equal. We also do not consider other conditions. Only the sizes of bets differ:
As the system selects in the block those advertisers who have the value of the product of the bid on the CTR above, we get:
Advertiser X misses the block. But he needs to be in special placement, and for this he decides to raise the rate. He sets $ 2.01, and now advertiser Y drops out of the block. Now that Y is at the entrance to the special placement, the size of his bid starts to influence how much advertisers inside the block have to pay. Since its rate is 2 cu, the cost per click in a block rises to 2.01 cu:
After some time, Y will again want to return to the block. To do this, he will have to bid more than the advertiser X, and he will be forced to bet at least 2.02 USD, that is, kill the bid that was previously the maximum for him.
This contextual advertising reminds poker or auction: when we set the maximum bid, we determine how much we ourselves have to kill in the next round.
If Y had initially set a lower bid, now he would have to pay less. In our example, with a starting rate of Y at 1.5 USD. in the next round of bidding he would have to put 1.52 USD, which is 25% more profitable than 2.02 USD
Let's call this process “Warming up an auction”: the greater the value of the advertiser’s maximum bid differs from that required to get to the position he needs, the more he warms up the auction, and the more expensive the placement will be for all advertisers, including himself.
Consequently, the optimal strategy is to set a rate of $ 0.01 each time. more than you need to get into the block. But such an approach increases the risk that your competitor will immediately outbid your bet, or because of minor CTR fluctuations, you and your competitors will not have enough of your bet and you will fall out of the block. Therefore, those advertisers who change bids manually, regularly set bids by 10-30% more than the required position requires, and the auction warms up. Which of the Yandex strategies is used in this case does not matter.
Since the bid manager updates bids more often, the auction warms up more slowly and you pay less.
Let's go back to the last example. Imagine that Y is also willing to pay 2 cu, but instead of the strategy of Direct, he uses a bid manager.
Bidder will check how much you need to pay to get into special placement, and put on 0.01 cu more. To get Y to the third place at the very beginning of the auction, it will be enough for the bid-manager to indicate the rate of 1.01 USD. If X wants to get into special placement, he will have to pay at least 1.02 cu. In order for Y to go back to the block, the bid manager will raise the rate by another cent, to 1.03 cu This will continue until Y reaches the maximum bet.
If X works manually, the bidding process may take a long time. Y will spend more time in special placement than X, and will receive visitors at a price less than its maximum bid, i.e. less than 2 USD
Working with a bid manager can slow down the heating of the auction for all participants. If any of your competitors' campaigns are temporarily disabled (for example, there is a time limit on impressions), the bid manager will reduce your bids to the minimum required, which means the auction will warm up more slowly.
In addition, if you use a bid manager, your competitors do not understand what maximum bid you can set, and you extend your time in special placement and save money.
Rates change quite often, so everyone needs a bid manager.
Some advertisers believe that in non-competitive topics you can absolutely safely bid once a week, which means you can continue to work manually. Is it so? Let's figure it out.
For two weeks, my colleagues and I collected data every 20 minutes on rate updates for more than 50 thousand key phrases in 13 topics for eLama.ru customers. And what data we obtained:
The graph shows that CPCs vary by an average of 15% of the phrases in each of the topics.
These data show that every 20 min. the rates change on average by 12.5% ​​in each of the topics, while the cost of accommodation often changes in a big way.
Based on this information, we can conclude that each advertiser needs to adjust bids, and the more often the better. Considering that manual adjustment is long and laborious, bid managers will cope better with this task.
Whatever one may say, bid-managers make the advertiser’s life much easier. In the end, even Yandex recognizes the importance of automation. At RIW 2013, the head of the commercial direction of Evgenia Lomize said:
And the more advertisers who deny this fact are, the more advertisers who use bid managers and other ways of automation in contextual advertising can earn and save.
This attitude not only grieves me as a staunch supporter of bid managers, but also seems to be not sufficiently substantiated. Therefore, we decided to conduct our own research and reasonably answer the question whether bid managers are really needed if there are ready automatic Yandex.Direct strategies? The result of our work, I presented at the Autumn Session on contextual advertising. Below I publish the results of the study.
How much is a special placement in Yandex.Direct?
Advertisers with the highest CTR bid are placed in special placement. Inside this block, advertisers are ranked in descending order.
The cost of entry in the special placement is determined by the closest advertiser who did not get into it.
')
To begin with, let's look at the principles of the Yandex.Direct auction.
Take an auction in which four advertisers participate. Imagine that all participants are advertised for the same phrase, but have different maximum bids and CTR . The remaining parameters will be taken as equal.
All advertisers work on the “ Highest Available Position ” strategy:
According to Yandex.Direct Help, special substitution will receive ads with the highest CTR bid. In the ad block will be arranged in descending order of the maximum bid.
Based on this, assume that our advertisers will take the following positions:
In fact, the product of the CTR for the maximum bid can be understood as the average earnings of the system on displaying one advertiser’s advert when writing off the maximum bid. Let's call this indicator "Possible profitability of the advertising system."
Each contextual system seeks to get as much profit as possible. From the table it is clear that even the second bid could not help advertiser D to get into the special placement block, since it has a low CTR, which means that the possible profitability of the system from this advertiser will be lower than from the rest.
With how to be in the block, we figured out. Now let's see how to calculate the minimum cost per block for each advertiser.
Since the system seeks to maximize profitability, it must earn on each advertiser who was in the block, no less than those who did not get into this block.
In our case, the advertiser D turned out to be outside the special placement. We can assume that you can calculate the cost of entering the special placement as follows:
The cost of entry in the special placement for the advertiser X = CTR D * D / CTR rate X + 0.01 cu where X - advertisers A, B, C. Ie Entry cost is determined by the closest advertiser who missed it.
At the same time, it doesn’t matter what strategy the advertiser X uses - “Display in the block at the lowest price” or “Highest available position”.
Thus, we obtain the following parameters for the cost of entry in the special placement for each advertiser:
Do Yandex.Direct strategies guarantee the right positions?
The strategy does not guarantee getting to the desired line of special placement.
Manually controlling bids, you warm up the auction and pay more.
Let's change the conditions: advertisers A and C are switching to the strategy “Display in a block at the lowest price”. In this case, C will take the first place, A will take the second place, and advertiser B, who will remain faithful to the “Highest available position”, will be shown on the third line:
In the end, oddly enough, the advertiser will be shown at the entrance to the special placement, who chose the strategy “The highest available position”, and two advertisers with the strategy “Show in the block at the lowest price” will take first and second place.
And this does not go against the rules of Yandex.Direct. In the Help, it is said that the strategy “Display in the block at the lowest price” does not guarantee getting on the last line of special placement.
Consider another example. At this time, all advertised on the strategy "Display in the block at the lowest price," and the CTR are equal. We also do not consider other conditions. Only the sizes of bets differ:
As the system selects in the block those advertisers who have the value of the product of the bid on the CTR above, we get:
Advertiser X misses the block. But he needs to be in special placement, and for this he decides to raise the rate. He sets $ 2.01, and now advertiser Y drops out of the block. Now that Y is at the entrance to the special placement, the size of his bid starts to influence how much advertisers inside the block have to pay. Since its rate is 2 cu, the cost per click in a block rises to 2.01 cu:
After some time, Y will again want to return to the block. To do this, he will have to bid more than the advertiser X, and he will be forced to bet at least 2.02 USD, that is, kill the bid that was previously the maximum for him.
This contextual advertising reminds poker or auction: when we set the maximum bid, we determine how much we ourselves have to kill in the next round.
If Y had initially set a lower bid, now he would have to pay less. In our example, with a starting rate of Y at 1.5 USD. in the next round of bidding he would have to put 1.52 USD, which is 25% more profitable than 2.02 USD
Let's call this process “Warming up an auction”: the greater the value of the advertiser’s maximum bid differs from that required to get to the position he needs, the more he warms up the auction, and the more expensive the placement will be for all advertisers, including himself.
Consequently, the optimal strategy is to set a rate of $ 0.01 each time. more than you need to get into the block. But such an approach increases the risk that your competitor will immediately outbid your bet, or because of minor CTR fluctuations, you and your competitors will not have enough of your bet and you will fall out of the block. Therefore, those advertisers who change bids manually, regularly set bids by 10-30% more than the required position requires, and the auction warms up. Which of the Yandex strategies is used in this case does not matter.
What is the power of the bid manager?
Since the bid manager updates bids more often, the auction warms up more slowly and you pay less.
Let's go back to the last example. Imagine that Y is also willing to pay 2 cu, but instead of the strategy of Direct, he uses a bid manager.
Bidder will check how much you need to pay to get into special placement, and put on 0.01 cu more. To get Y to the third place at the very beginning of the auction, it will be enough for the bid-manager to indicate the rate of 1.01 USD. If X wants to get into special placement, he will have to pay at least 1.02 cu. In order for Y to go back to the block, the bid manager will raise the rate by another cent, to 1.03 cu This will continue until Y reaches the maximum bet.
If X works manually, the bidding process may take a long time. Y will spend more time in special placement than X, and will receive visitors at a price less than its maximum bid, i.e. less than 2 USD
Working with a bid manager can slow down the heating of the auction for all participants. If any of your competitors' campaigns are temporarily disabled (for example, there is a time limit on impressions), the bid manager will reduce your bids to the minimum required, which means the auction will warm up more slowly.
In addition, if you use a bid manager, your competitors do not understand what maximum bid you can set, and you extend your time in special placement and save money.
Does everyone need a bidder
Rates change quite often, so everyone needs a bid manager.
Some advertisers believe that in non-competitive topics you can absolutely safely bid once a week, which means you can continue to work manually. Is it so? Let's figure it out.
For two weeks, my colleagues and I collected data every 20 minutes on rate updates for more than 50 thousand key phrases in 13 topics for eLama.ru customers. And what data we obtained:
The graph shows that CPCs vary by an average of 15% of the phrases in each of the topics.
These data show that every 20 min. the rates change on average by 12.5% ​​in each of the topics, while the cost of accommodation often changes in a big way.
Based on this information, we can conclude that each advertiser needs to adjust bids, and the more often the better. Considering that manual adjustment is long and laborious, bid managers will cope better with this task.
Whatever one may say, bid-managers make the advertiser’s life much easier. In the end, even Yandex recognizes the importance of automation. At RIW 2013, the head of the commercial direction of Evgenia Lomize said:
“The art of managing modern contextual advertising is the art of managing automation tools”
And the more advertisers who deny this fact are, the more advertisers who use bid managers and other ways of automation in contextual advertising can earn and save.
Source: https://habr.com/ru/post/244331/
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