Anyway, you're right: Most PPC companies do the same thing: automated bid management and low-paid contractors, often in Southeast Asia.
1. No one but Overture & Google know who the 12 largest ppc companies are.
2. All but two of our 40+ employees are full-time employees.
3. All bid mgmt firms are not the same, at least one I know of #:^) uses portfolio algorithms rather than rules-based systems to optimize keyword sets. On another thread someone mentioned that all the vendors at SES were claiming portfolio-based optimization, but if you ask them even the most basic of questions it becomes clear "portfolio optimization" to them simply means applying the same rule(s) to a group of keywords - that couldn't be further from what a portfolio algorithm does.
However, in this case, I must just state that I agree with Shorebreak's points 100%.
Plus everyone else who looks at SES and SEMPO's list of advertisers.
> 2. All but two of our 40+ employees are full-time employees.
In the USA? Full-time at realistic wages?
> 3. (...) that couldn't be further from what a portfolio algorithm does.
So explain portfolio management.
In the end, whoever can bring the best results is good.
I called him on his claims about "keyword clustering", and never really got any firm answers.
Also, where are live case studies, etc?
eFrontier is one of the newest players in the space. I've seen strong starts in the SEM area before, backed by strong funding and marketing.
All the technology in the world isn't going to be the difference in large scale paid search campaigns. It's having knowledgable analysts that work "hand in hand" with advertisers, with the ability to correctly define campaign goals, use technology to best fit the campaign goals, and bottom line, achieve those goals....
I've got clients that have been with us for 5+ years in the paid search management space. I'm quickly tiring of the "smoke and mirrors".
I accept the blow-hard label; many people on WebmasterWorld (including a good number who have since become satisfied clients) have told me that my strong opinions regarding portfolio theory and support of those opinions are what interested them in the first place. If I offend folks, though, I'll try to understand that criticism.
Regarding your specific points:
1. $100M+ in annual spend is only 2-3% of all of paid search, but it's more than anyone else and so worth noting in support of my points. If more spend is working with us than anyone else, that's as valid a support for the advantage of portfolio theory applied to keywords as anything else, *IMO*.
2. With regards to keyword clustering, you won't get answers from me on it, nor will you get answers on a lot of EF proprietary things. Having a problem with that is fine, but not understanding why we wouldn't want to spill all our marbles flies in the face of reason. If you asked any quantitative hedge fund on Wall St how they built their models, people would think this was your first day on the job.
3. Case studies - I'll be the first to admit we don't say much about ourselves on our website (see point #2 above), and along those same lines I'm constantly surprised by firms who list all their clients on their website. Those in the SEM world who do make SEM salespersons' jobs everywhere easier.
4. To your point about EF being new, I'll flip that around on you and say that 2+ years ago SEM was a much, much simpler exercise given that CPC's were a fraction of what they are now. Back then it was all about getting tons of good keywords up and running, much as is the case today in Japan and many European countries. This bubble-era view of SEM doesn't work too well today here in the U.S., just as classic rules-based bid mgmt has become a commodity.
5. I do agree with you that knowledgeable analysts/client services teams are of the utmost importance, couldn't agree more. But if multiple SEM firms have knowledgeable folks, the firm who arms those teams with the most automated, most efficient systems is going to win; that's what always has me "blowing" about the advantages of portfolio algorithms as applied to keyword portfolio management.
Shorebreak
I'm not going to go back and forth, as the purpose of WebmasterWorld is not to toot one's own horn, though you've managed to make a career out of it here in the few short months you have participated...
1. "$100M+ in annual spend is only 2-3% of all of paid search, but it's more than anyone else and so worth noting in support of my points."
Who ever acknowledged outside of you, that eFrontier has the largest portfolio in annual paid search spend, or that you actually even have 100M annual spend? :)
2. You did attempt to justify keyword clustering in another thread focusing on "sparse data keywords", and you fell way short of returning any plausible answer Also, most Wall Street analytics systems do one thing, make the Brokers money, not the investors.. It's all about the volume of trades, not the trades themselves, afterall...
3. Case studies are NOT client lists. They are "real world" examples of a process over a time line. We don't necessarily identify the advertiser in our case studies, but our case studies span a period, longer than eFrontier has been in existence.. My point being, advertisers want a solution that's going to continue to improve their bottom line over the long run. (In your investment terms, they ain't looking for who performs the best during any single year.)
4. Now you are minimizing the technology that was first to market, implicating there was little need for real time analytics and bid management technology? I'm completely lost here. You saying it wasn't important to show a profit 2 years ago? That bottom line wasn't important? What you are really saying, is you didn't exist then, so it doesn't count... :)
5. I have yet, to see a investment software system that can show a profit, year after year. You'd better hope your theories hold more water in the paid search industry, than they hold in the investement world!
Notice I didn't once mention my company's technology (our secret black box analytics), our client's annual spend, or even our name! Don't have to, our clients know who we are. We don't even bother exhibiting at SES any more. The only value of SES, is I can line up my vendors in a row, and do face-to-face's back-to-back in a short period of time.
So, if you have something horizontal to contribute to bring more knowledge to WebmasterWorld members about paid search, bring it on. But unless your ready to sit down and shed some light about your "black box" technology, I for one don't want to hear about the "smoke and mirrors" any longer....
"Portfolio management" is a Wall Street marketing term. Any rules-based strategy, whether you implement it manually or automated, is going to fail because conditions constantly change. Despite hundreds of millions of dollars in research, Wall Street hasn't been able to develop an automated stock management system (proof: if a Wall Street company had such a thing, they would offer guaranteed 50% annual returns).
But the stock market is geological bedrock compared to PPC. GAW changes the rules just about every other week.
If GAW's rules change over and over again, then there are no rules. This means there isn't portfolio management. At best, there's "management of portfolio management". That is done by alert humanoids who watch GAW and constantly adapt and develop new strategies.
I, for one, like it very much that GAW constantly changes the rules. This obligates PPC advertisers to pay attention. The ones who adapt will see success; the ones who don't pay attention, who don't figure it out, who put their accts on autopilot, or who rely on rules will get hammered. Google is enforcing Darwinian Survival of the Fittest by constantly switching from hoops to mazes to Rubic Cubes.
So, portfolio management? Bring'em on! A company that relies on portfolio management has a huge infrastructural investment in a complex system that will not be nimble and easy to change.
Portfolio management or portfolio theory - whatever you want to call it - is a whole heck of a lot more than marketing speak. Heny Markowitz introduced portfolio theory in 1952 and won the Nobel Prize in economics for it.
[riskglossary.com...]
In a nutshell, what he did was take the intuition around the value of diversification that we all have and create a mathematical structure for it. If you go to the above URL and read the 2nd paragraph you'll see that investment theory prior to Markowitz resembled to a tee the rules-based bid mgmt tools that most everyone's hawking today. Likewise, the definition therein of the difference between classic rules-based investing and his portfolio theory applies to keywords:
"...he proposed that investors focus on selecting portfolios based on their overall risk-reward characteristics instead of merely compiling portfolios from securities that each individually have attractive risk-reward characteristics. In a nutshell, inventors should select portfolios not individual securities."
Replace "risk" with "CPC" and "reward" with "revenue" and the author could just as well be talking about Google or Overture.
To me, portfolio theory applied to keywords is far from a marketing gimmick. It's math that allows you to do what would otherwise be impossible for a large set of keywords - look at the entire universe of choices that could be made at any point in time - not just at the individual keyword level but across all the keywords in a campaign - and pick the right set of bids that comprise Markowitz' "efficient frontier" for those keywords.
Eurydice, you rightly state that a rules-based strategy can't keep up with the dynamism of the keywords worth going after, and that's precisely what is unique about portfolio theory as applied to keywords - it's possible to build portfolio models on historical cost & revenue data, yet continuously update them as the cost and revenue dynamics of keywords within the keyword portfolio change. So rules-based and portfolio-based optimization are two different approaches, but the latter bears Markowitz' signature.
Would you care to explain the following?
A. How CPC in bid management is structurally equilavent to "risk" in CAPM? In such a model it would seem to me that CPC would be structurally equilavent to investment price.
B. How does portfolio theory relate to keyword targeting?
As I see it the key insight of portfolio theory is the inherent value of *diversification* -- don't invest in just a few industries that you forecast will do best, but to invest in a broader array of industries, esp. focusing on ones that will do well when others do poorly.
Given that the typical PPC advertiser is in one narrow business, how the heck are they supposed to diversify the PPC selection?
C. How can you say that a strategy based on the rules of portfolio theory is not a rules-based model? It sounds to me like saying "this is not a red shirt! It is a crimson shirt!"
