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Bidding Models Complex & Simple By Sandeep Dey

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From the SMX Advanced Conference in Seattle, Washington, June 22-23, 2016. SESSION: The Mad Scientists of Paid Search. PRESENTATION: Bidding Models Complex & Simple - Given by Sandeep Dey, @sdey - Groupon Inc, Staff Data Scientist. #SMX #11B

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Bidding Models Complex & Simple By Sandeep Dey

  1. 1. #SMX #11B @sdey Optimizing Bidding for different Scenarios Bidding Models Complex & Simple
  2. 2. #SMX #11B @sdey Developing a Bidding Strategy What do you want to do ? 1.  Branded vs Transactional 2.  Reach vs Efficiency 3.  CPA vs CPC
  3. 3. #SMX #11B @sdey Target: Maximize Volume •  Concentrate on keywords which have low CPC but high volume •  Queries with lower transaction intent e.g. Facebook can sustain huge traffic even at 0.01$ •  Bidding becomes less important in such a scenario, budget maintenance becomes more important •  Bid to get Top of Page
  4. 4. #SMX #11B @sdey Target : Get revenue & new customers from spend •  Set up efficiency targets & budgets •  Go for transactional keywords •  Could be lower volume •  Mine tail keywords •  Bidding is the most important part of this strategy
  5. 5. #SMX #11B @sdey Theory of Bidding, Cost, Revenue & Efficiency Bidding Theory
  6. 6. #SMX #11B @sdey •  Clicks increase as bid increases (linear) •  Revenue increases as bid increases (linear) •  Cost increases as bid increases (quadratic) •  Efficiency increases as bid increases (linear) How does efficiency change with bids bid
  7. 7. #SMX #11B @sdey •  Maximize volume while hitting efficiency targets •  Profit is not the metric we are optimizing for Aim of the game : Hit target efficiency
  8. 8. #SMX #11B @sdey •  PLA •  Revenue follows a logit function •  EGR follows a crazy slope •  Broad Match Keywords •  Cost follows an exponential trend with bid increase •  Revenue follows a log trend with bid increase Not all keywords or programs are created equal
  9. 9. #SMX #11B @sdey Implementing Basic Bidding into an account The Basics
  10. 10. #SMX #11B @sdey Revenue per click x Efficiency target OR Revenue per click ROAS target Bid Calculation Basics for a Keyword Measures •  Revenue last 30 days •  Clicks last 30 days Parameters •  Efficiency target (EGR) •  cost / revenue •  ROAS target •  revenue / cost
  11. 11. #SMX #11B @sdey •  Different products sell at different times. •  Use exponential decay on revenue and clicks. •  Revenue from N days ago has decay ^ N weight •  Start with 0.95 decay factor Seasonality : Use exponential decay
  12. 12. #SMX #11B @sdey •  Down jackets & sweaters sell the most from Nov to Jan •  The sales volume decreases by half at the end of Feb •  Without a decay , the bids will follow seasonal trends very slowly Seasonality : Use exponential decay YEAR
  13. 13. #SMX #11B @sdey •  Difference between bid (max cpc) & cost (avg cpc) •  Bids have to be incremented by a bid headroom factor to prevent hyper efficiency •  Bid headroom = max cpc/ avg cpc Bid headroom
  14. 14. #SMX #11B @sdey •  Say you want to pay $.90/click •  Bid up at 1.10$ •  Bid up by 20% ( max cpc x clicks / cost ) Bid headroom
  15. 15. #SMX #11B @sdey •  Choose a time period to collect Revenue & Clicks (30 days) •  Keywords with clicks > threshold (100 clicks) can be bid with individual info •  Bid = revenue/clicks x efficiency target x bid headroom High traffic keywords
  16. 16. #SMX #11B @sdey •  Group multiple keywords to get enough clicks above a threshold •  Grouping can be based on adgroup & campaigns •  Grouping can be also based on category of the keywords. Low traffic keywords : Grouping keywords
  17. 17. #SMX #11B @sdey Low traffic keywords : Grouping keywords •  E.g. group electronics into a single category •  Group Apparels into a single category if needed
  18. 18. #SMX #11B @sdey •  Increase date range for low traffic keywords •  Less frequent keywords : longer time ranges •  Beware too long time ranges can’t follow seasonality Low traffic keywords : Increase date ranges
  19. 19. #SMX #11B @sdey Issues to keep in mind while implementing a bidding strategy The Troublemakers
  20. 20. #SMX #11B @sdey •  Keep a lookout for bad search queries & keywords •  If they have lower bids, they will reduce bids for the group they are clustered in •  Solution : Negative keyword them or be aggressive in their bid reduction Keywords which don’t convert
  21. 21. #SMX #11B @sdey •  Addition of bid modifiers would upset your bidding •  A negative bid modifier tends to make you hyper-efficient •  Final CPC are not equal to what is calculated •  Solution: measure the overall effect of bid modifiers on CPC and adjust Bid Modifiers
  22. 22. #SMX #11B @sdey •  Remarketing lists for search ads (RLSA) •  +100% increase for previous visitors •  Bid is set at 1$ , but CPC >1$ •  Solution : Figure out how audiences affect the CPC in total Bid Modifiers
  23. 23. #SMX #11B @sdey Machine Learned Models for Bidding for an ecommerce Advanced Bidding
  24. 24. #SMX #11B @sdey •  Transactional Text Ads Bidding •  Campaign Strategy centered on either landing on Product Page or Search Page •  Modeled into a Machine Learning Problem with targets as revenue per click Advanced Bidding for Ecommerce
  25. 25. #SMX #11B @sdey Target feature : Future Revenue Per Click Input Features : •  Historical Revenue Per Click •  Margin & Price •  Discounts •  Matchtype •  Keyword Relevance to Product Title Performance : •  Revenue lift of +20% with cost increase of +10% as compared to baseline Predictive Modeling at a keyword level
  26. 26. #SMX #11B @sdey LEARN MORE: UPCOMING @SMX EVENTS THANK YOU! SEE YOU AT THE NEXT #SMX

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