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Keyword portfolio optimization tutorial |
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Monday, 01 October 2007 |
Introduction:
This tutorial show how to algorithmically manage Adword (or similar ad
exchanges) using Analytica,
What's Best Linear optimization (Excel extensions), and MineSet
(cluster analysis). Possibilities of using complex event processing
using SQLStream or Coral8 will be discussed, as well as the use of Google's
Adword API (Apility for PHP) for automating the data
gathering process.
Question: How
much to spend (minimum) per keyword to acheive revenue goals in
real-time (as soon as data is availalble or per schedule)?
- What combination of ad purchases (or media/channel purchases) to
reach target audience percentages in demographic groups - for
real estate, social networking, products, or services.
STEPS:
1. Find cost per 1000 clicks (in Google Analytics)
2. Create a Revenue model (Analytica or Excel).
Revenue depends on a number of variables including search engine
position, bounce rate, conversion rate, affiliate traffic, channel
traffic, total market volume, and others. Map a large set of hundreds
of thousands of keywords to a set of hundreds or thousands of keyword
groups (clusters - Analytica is useful for sparse matrix mapping, where
local changes within a group of keywords can be mapped to the same
Adgroup.)
3. Model the question as a linear optimization.
This example shows 4 keywords. It can be extended to thousands of
keywords (or Adgroup) in Excel (see image 1 below). Calculate the
coefficients that each keyword group contributes to each goal. Note that
this is an approximation. The more related the keyword variations, the
better the approximation, i.e. the keyword phrase "medium price home in
portland oregon" can have hundred of mutations (variations, mispell,
and closely related phrase).
4. Use Google's Adword API (i.e. Apility).
Image 2 shows the solution. The percentage of blend shows what
percentage of what keyword to buy. For example, 49.9 % of clicks should
be through keyword "home". This yield the most revenue for the
investment. Note that the 4th keyword yields great contribution, but is
not a bargain at $89.00. It is not purchased.
What are dual values? In Image2 below, spending is saved by $5.00 (cell
J9) per unit (Cost/1000clicks) if the revenue requirement for goal 3 is
reduced from 5.2 to 4.2 (one unit). Similarly, if the revenue
requirement for goal 4 is reduced from 19 to 18, spending is saved by
$0.02 per unit. For goals 1 and 2, reducing the requirments give no
savings since there are excess of contribution to goal 1 and
2 from these keywords given the revenue requirements.
Goals are Conversion Funnel goals. For example, in Google
Analytics, four URL goals can be set, i.e. one goal could be
the "Thank you" page.
Cell F18 shows a dual value $59.89. This is the amount by which the
'Cost/1000clicks' would have to be reduced before it should be
purchased in the keyword mix. |
IMAGE
1 - SETUP
IMAGE
2 - SOLUTION
IMAGE3
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