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 at Yandex.Direct, the relevance of bid managers is a thing of the past. Unfortunately, this opinion I often meet among my colleagues in the market, whose opinion I value and respect.

    This attitude not only upsets me as a staunch supporter of bid managers, but it also seems insufficiently justified. Therefore, we decided to conduct our own research and answer reasonably the question, do we really need bid managers with ready-made automatic Yandex.Direct strategies? I presented the result of our work at the Autumn session on contextual advertising. Below I publish the results of the study.

    How much does a special placement cost in Yandex.Direct?

    Advertisers with the highest bid for CTR fall into special placement. Inside this block, advertisers are arranged in decreasing order.
    The cost of entering a special placement is determined by the nearest advertiser who did not get into it.

    First, 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 considered equal.

    All advertisers work according to the " Highest available position " strategy :

    According to Yandex.Direct help, they will be placed in special placementsAds with the highest CTR bid. In the ad block, the maximum bid values will be arranged in descending order.

    Based on this, we assume that our advertisers will take the following positions:

    In fact, the product of CTR at the maximum bid can be understood as the average earnings of the system on the display of one advertiser’s ad when the maximum bid is written off. We call this indicator "Possible profitability of the advertising system."

    Each contextual system seeks to get as much profit as possible. The table shows that even the second highest bid could not help advertiser D get into the special placement block, since it has a low CTR, which means that the possible system profitability 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 of getting into the block for each advertiser.

    Since the system seeks maximum profitability, it should earn on every advertiser who is in the block no less than on those who did not fall into this block.

    In our case, advertiser D turned out to be outside of the special placement. We can assume that the cost of entering the special placement can be calculated as follows:

    The cost of entering the special placement for the advertiser is X = CTR D * D / CTR X rate + 0.01 cu , where X are advertisers A, B, C. That is The cost of entry is determined by the nearest advertiser who didn’t get into it.

    It doesn’t matter which strategy 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 entering the special placement for each advertiser:

    Do Yandex.Direct strategies guarantee the right positions?

    The strategy does not guarantee hit on the desired line of special accommodation.
    Managing bids manually, you warm up the auction and pay more.

    We’ll change the conditions: Advertisers A and C switch to the “Display in block at the lowest price” strategy. In this case, C will take the first place, A - the second, and the advertiser B, which remains true to the "Highest available position", will be shown on the third line:

    As a result, oddly enough, the advertiser who chose the strategy "will be shown at the entrance to the special placement" The highest available position ", and two advertisers with the strategy" Display in the block at the lowest price "will take first and second place.

    And this does not contradict the Yandex.Direct rules. The “Help” saysthat the strategy “Display in the block at the lowest price” does not guarantee getting on the last line of special placement.

    Consider another example. This time, everyone is advertised according to the "Display in the unit at the lowest price" strategy, and the CTR is equal. Other conditions we also do not take into account. Only the size of the bids is different:

    Since the system will select those advertisers with a higher clickthrough rate on the CTR, we get:

    Advertiser X is not in the block. But he needs to be in special accommodation, and for this he decides to raise the bid. He sets 2.01 cu, and now advertiser Y drops out of the block. Now, when Y is at the entrance to the special placement, the size of his bid begins to affect how much advertisers should pay inside the block. Since his bid is 2 cu, the click price in the block rises to 2.01 cu:

    After some time, Y will want to return to the block again. To do this, he will have to set a bid more than that of advertiser X, and he will be forced to put a minimum of 2.02 cu, that is, to kill the bid that was previously maximum for him.

    This reminds contextual advertising of poker or auction: when we set the maximum bid, we determine how much we ourselves will have to kill in the next round.

    If Y had initially set a lower bet, now he would have to pay less. In our example, with an initial rate of Y at 1.5 cu in the next round of trading he would have to put 1.52 cu, which is 25% more profitable than 2.02 cu

    We will call this process “Auction Opening”: the greater the advertiser’s maximum bid value differs from that necessary to get to the position he needs, the more he warms up the auction, and the more expensive it will cost to place an ad for all advertisers, including himself.

    Therefore, the optimal strategy is to set a bet at 0.01 cu each time. more than you need to get into the block. But such an approach increases the risk that a competitor will immediately outbid your bid, or because of insignificant CTR fluctuations, your bid and your competitors will not be enough and you will drop out of the block. Therefore, those advertisers who change bids manually regularly set bids 10-30% more than the required position, and the auction warms up. Which of the Yandex.Direct strategies is used does not matter.

    What is the strength of a bid manager?

    Because the bid manager updates bids more often, the auction warms up more slowly, and you pay less.

    Let's get back to the last example. Imagine that Y is also ready to pay 2 cu, but instead of Direct's strategy, he uses a bid manager.

    The bidder will check how much you need to pay to get into special placement, and bet 0.01 cu more. In order for Y to get third place at the very beginning of bidding, it will be enough for the bid manager to indicate a rate of 1.01 cu If X wants to get into special accommodation, he will have to pay at least 1.02 cu In order for Y to return back to the block, the bid manager will raise the bid 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 the special accommodation than X, and will receive visitors at a price less than his maximum bid, i.e. less than 2 cu

    Working with a bid manager can reduce the speed of an auction’s warm-up for all bidders. If the campaigns of one of the competitors are temporarily disabled (for example, there is a time limit on impressions), the bid manager will reduce your bids to the minimum necessary, which means that 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 accommodation and save money.

    Does everybody need a bidder

    Bids change quite often, so everyone needs a bid manager.

    Some advertisers believe that in non-competitive topics you can absolutely calmly place bids once a week, which means that you can continue to work manually. Is it so? Let's get it right.

    For two weeks, my colleagues and I every 20 minutes collected data on bid updates for more than 50 thousand key phrases in 13 topics on customers. And here are the data we received: The

    graph shows that CPCs change on average at 15% of phrases in each topic.

    These data show that every 20 min. bid values ​​change on average by 12.5% ​​in each of the topics, while the cost of placement often changes upwards.

    Based on this information, it can be concluded that each advertiser needs to adjust bids, and the more often, the better. Given that manually adjusting is long and time-consuming, bid managers will do better.

    Whatever one may say, nevertheless, bid managers make the advertiser’s life much easier. In the end, even Yandex recognizes the importance of automation. At RIW 2013, Eugenia Lomize, Head of Commercial, said:
    “The art of managing modern contextual advertising is the art of managing automation tools”

    And the more there are those advertisers who deny this fact, the more other advertisers who use bid managers and other automation methods in contextual advertising will be able to earn and save.

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