New search marketing firm stepping outside the rules

Automated keyword bid management by a rules-based system is one way to monitor paid search campaign performance, but a rules-based system may not drive the most return from keyword spending, says a new search marketing company with a different approach. Rather than handling keywords individually, Efficient Frontiers Inc. treats them as a portfolio, using an algorithmic formula to predict the expected return on different variations of keyword bids and automatically selecting the optimal mix for a highest rate of return.

CEO Ellen Siminoff says the company`s service essentially applies the analytics used on Wall Street in stock portfolio management to manage keyword investment. "We use technology to, in real time, dynamically take into account changes in the marketplace and your own return metric to affect your portfolio,” she says. The service models program management according to the return metric specific by the site operator, whether it’s cost per customer acquisition, percentage of gross margin, or other metric.

Siminoff says the frequently-used rules-based approach, while effective for smaller marketers, doesn’t scale for large keyword programs. “You can look at a keyword, what the marketplace for it would be, what you might want to bid against it, what your click-through might be and what your conversion might be, make a decision, execute on that and close the loop to see if you got the return you expected. If you did, you’d again bid at that; if you got better you might bid more; if you got worse, you might bid less or just eliminate the word,” she says. “That’s fine for one word but you need a formulaic method to do that with thousands or hundreds of thousands of words.”

Efficient Frontiers, which has been quietly operating for more than a year with some of online retail`s biggest names as clients, currently has more than 2 million keywords under management from about 20 clients, Siminoff says.