Search mar­keters hear a lot about port­fo­lio opti­miza­tion for paid search cam­paigns. Man­ual or rules-based bid­ding of key­words may get you some basic opti­miza­tion ben­e­fits. But for enter­prise adver­tis­ers, port­fo­lio opti­miza­tion is acknowl­edged as the gold stan­dard to squeeze out every last drop of return from paid search.

Port­fo­lio Optimization

Describ­ing port­fo­lio opti­miza­tion is straight­for­ward. First, build a math­e­mat­i­cal model for every key­word in your cam­paign that describes exactly what you’ll get at every bid­ding point: clicks, cost-per-click, posi­tion, rev­enue, and so on. Then, given a goal (like a monthly bud­get or cost-per-acquisition tar­get), advanced math­e­mat­ics can deter­mine exactly where to invest every dol­lar for the max­i­mum pos­si­ble return. As you col­lect new data, update the mod­els and repeat.

While easy to describe, it’s hard to exe­cute. Adobe Media Opti­mizer’s algo­rithms have been updated and refined over sev­eral years. There’s a con­stant process of inno­va­tion as the SEM land­scape evolves around Google prod­uct list­ing ads or enhanced campaigns.

So how does a mar­keter eval­u­ate what’s going on inside a port­fo­lio opti­miza­tion plat­form? Google announced bid­ding fea­tures within AdWords. Other plat­forms also pro­mote fea­tures that are described as port­fo­lio optimization.

Illu­mi­na­tion is a good metaphor to use: tung­sten, halo­gen, and LED bulbs all might emit the same amount of lumens. Yet, LEDs are far more effi­cient. How can you make sure a plat­form is pro­duc­ing light instead of heat?

Like me, you prob­a­bly don’t have advanced math­e­mat­i­cal or sta­tis­ti­cal knowl­edge, but you still want to under­stand how it works.

There’s a hand­ful of “must haves” mar­keters should insist on. In this post, I’ll dis­cuss why these are impor­tant and how Adobe Media Opti­mizer answers each of them.

Key­word Mod­els Avail­able in the User Interface

If you want to opti­mize algo­rith­mi­cally, under­stand­ing the pos­si­ble costs and returns for every key­word at every posi­tion is essen­tial. Let’s be clear: this isn’t a nice-to-have, it’s table stakes. You can’t do any­thing else if you don’t have key­word models.

Every key­word model built by Adobe Media Opti­mizer is avail­able within the user inter­face. We call them bid units. A bid unit is more fun­da­men­tal than a key­word. If a key­word is in a port­fo­lio on three dif­fer­ent match types, in three dif­fer­ent geo­graph­i­cally tar­geted cam­paigns, and on two search engines, that results in 18 sep­a­rate bid units. AMO also builds sep­a­rate mod­els for Google prod­uct list­ing ads, where expo­sure, rather than posi­tion, is more important.

For Adobe Ana­lyt­ics cus­tomers, the lat­est engage­ment data algo­rithms are also inform­ing the rev­enue part of the model. It’s bring­ing even bet­ter model accu­racy and higher ROIs. Lat­est engage­ment data? I told you LEDs were more efficient!

Any Adobe Media Opti­mizer cus­tomer can inspect every bid unit within the user inter­face and com­pare fore­casts against actual bids placed. You can also break it down by mobile and computer/tablet, but more on that later.

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If you can’t see key­word mod­els in a platform’s UI, you can’t be sure that they are there at all. At best, it’s a black box mod­el­ing approach. More likely, the plat­form isn’t doing key­word mod­el­ing at all, and there­fore doesn’t have the foun­da­tions to do port­fo­lio optimization.

Accu­rate models

Any­one can make a fore­cast. You made a fore­cast if you left the house with an umbrella this morn­ing. What’s impor­tant is whether a fore­cast is accurate.

Adobe Media Opti­mizer bares all with fore­cast­ing, and pro­vides Model Accu­racy reports right within the UI:

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If you have accu­rate mod­els, then you will find bet­ter per­for­mance and ROI. But accu­rate mod­el­ing is key: if it’s not accu­rate, it’s worth­less. Adobe Media Opti­mizer exposes this in the UI for cus­tomers to ver­ify accu­racy for themselves.

Accu­rate sim­u­la­tions avail­able on demand within the UI

The Adobe Media Opti­mizer UI auto­mat­i­cally cre­ates sim­u­la­tions for every port­fo­lio once a week. Cus­tomers can run cus­tom sim­u­la­tions in min­utes in the UI at any time, tweak­ing set­tings to meet their needs. There’s no need to request sim­u­la­tions from account man­agers — though our sup­port team is always on hand to help with ques­tions and best practices.

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Adver­tis­ers use these sim­u­la­tions to bud­get, plan and exe­cute their cam­paigns. To do that, they need con­fi­dence in the accu­racy of the simulation.

Accu­racy needs to be within a sin­gle digit per­cent­age. Large error bound­aries of 20%-40% are not accept­able — that’s the dif­fer­ence between a resound­ing suc­cess and abject failure. I wouldn’t want to bet my search mar­ket­ing career on that.

Opti­miz­ing adjust­ments for Google Enhanced Campaigns

Google AdWords has changed dra­mat­i­cally in the last 12 months. Opti­miza­tion used to be about bids and bud­gets, but with Enhanced Cam­paigns it’s now about bids, adjust­ments and bud­gets. Set­ting the right bid adjust­ments is crit­i­cal to success.

Scroll back up to the bid unit exam­ple, and you can see how we’re already mod­el­ing dif­fer­ences by device. Adobe Media Opti­mizer is mak­ing algo­rith­mic adjust­ments at ad group level. We’ve seen that this level of bid­ding makes a win­ning per­for­mance dif­fer­ence. Later in the year we’ll be releas­ing algo­rith­mic bid­ding for geo­graphic, time of day and audi­ences adjust­ments too.

Note that a text box in the UI where you can enter a bid adjust­ment is not opti­miza­tion. To really push per­for­mance with Enhanced Cam­paigns, you want a plat­form to algo­rith­mi­cally cal­cu­late that value for you.

There’s plenty of detail I haven’t gone into here. In future blog posts I’m going to dis­cuss how Adobe Media Opti­mizer deals with sea­son­al­ity, sparse data, key­word learn­ing and more. But I hope this helps you under­stand what port­fo­lio opti­miza­tion really is, and how to ver­ify the many claims you’ll hear in the industry.