PPC Bidding: Algorithmic Bidding vs Rule-Based Bidding (5 Pros and Cons)

Quick PPC Bid Management Overview

So, you have everything ready. The product images are pure perfection and product descriptions are oozing with keywords. You got your first positive reviews, and the stage is set for you to scale your business with online advertising that runs on PPC bidding.

You are confident, you can handle the demand increase and are hungry for success.

You decide to take the logical next step and create your first advertising account. You do all the grunt work there as well – keyword research, campaign creation, budget allocation and everything in between.

But then your PPC campaigns don’t produce the necessary results. How can you solve it? You find a possible solution: bid management optimization.

Bid Management Options

It’s a daunting concept that’s often not easy to understand. Plus it often means giving away control of your budget, at least partly.

Online advertising is easy enough to get started with. But when you want to pursue a specific goal, understanding how everything interacts can be extremely tricky and ever-changing.

It gets worse: what you understand today might be outdated tomorrow. Or not.

The only constant in online advertising is a never ending change. You need a solution that sees the full picture and can react accordingly.

So: this is where PPC bid management comes in.

You have 2 options for optimization of your PPC ads:

1. Algorithmic bidding
2. Rule-based bidding

Before I start, I have to be honest and admit our bias. With 10+ years of bid management experience under our belt and a proven track record, Adspert is a fierce defender of algorithmic bidding, the core of our solution for PPC optimization.

But we do recognize the advantages rule-based bidding can offer as well.

Let’s take a look at possible advantages and disadvantages of both, so you can make an informed decision about how you’d like to manage your bids.

1. PPC Campaigns: Level of Control

It’s only human not wanting to cede control, especially of your budget. But, remember – with the ever changing nature of online advertising, you don’t know what you don’t know.

Here’s where we get to the first obvious difference between algorithmic bidding and rule-based bidding.

Algorithmic Bidding: Less Control

Algorithmic bidding backed by an advanced, powerful AI can take into consideration factors beyond the immediate environment of the keyword.

Which on the other hand means that not every biddable object – keyword, ASIN, placement, etc. – will perform to your liking. In short, you have less control over your PPC bids.

But if you are ok with that, algorithmic bidding also brings great benefits:

• Learns from the big picture
• Makes the necessary adjustments on every biddable object’s level to ensure you reach your results
• Finds the sweet spot you’re after and prioritizes whichever keyword drives good results over others

Rule-Based Bidding: Full Control

You might not have the freedom to let a PPC bid optimization tool make flexible decisions on your behalf. Or you simply feel an aversion to the algorithmic bidding concept. Then rule-based bidding is your way to go as rule-based bidding gives you full control.

Rules based bidding enables you to:

• Simply set thresholds
• Define each and every rule (which are static by nature!)
• Keep track of what is happening with your advertising budget from beginning to end

But here’s the kicker: be prepared for a hard work tradeoff.

Us humans usually don’t have the mental capacity or the time to keep on top of all the changes.

To say the least, it’s tricky, to:

• Keep track of your competitor’s changes
• Follow platform’s changes
• Stay on top of consumer behavior changes

So this is a tradeoff you need to be aware of and OK with.

2. PPC Conversions Secret: Long Tail Keywords

Even if you haven’t yet seen the desired success from your Amazon advertising bidding, eBay bidding or any other PPC advertising activites, you have observed some results.

I can almost guarantee that if you look at your results, you will notice that long tail keywords are actually bringing in a higher percentage of conversions.

Long tail keywords (i.e. keywords consisting of more than three words) don’t come in big volume. However, their conversion rate is high, and in PPC bidding, this is an opportunity you should not miss!

The not-so-good news? Longtail keywords are also difficult to handle:

• There are seriously A LOT of them
• They often have low volume
• Are very specific and can also generate very few clicks or conversions

Algorithmic Bidding: Yay

If this situation rings true, algorithmic bidding is the one that will most likely produce better results.

We are all aware that AI and statistics are very helpful when dealing with many data points (big data). But did you know they can be just as helpful, or more, when dealing with few data points? See this article by Forbes to learn more about small data.

For example: A longtail keyword in your Amazon PPC ads campaign has 3 clicks. Can you tell if that is good or bad? Based on what?

Humans tend to draw incorrect conclusions.

And this is where AI and statistics step in. A powerful AI can:

• Automatically consider historical data of similar products, ads and keywords
• Model the market
• Handle these situations better also because it is much more objective

Rule-Based Bidding: Nay

Here’s where rule-based bidding falls short. Following everything that I described above, you need an approach that is as dynamic and flexible as possible.

And rule-based bidding just won’t cut it when it comes to harvesting long tail keyword:

• Cannot consider historical data
• No market modeling
• Does not work when there’s little data available

3. Bidding Work: Time-Consumer or Time-Saver?

The fact is that with the full control you get with rules, there’s also more bidding work.

Rule-Based Bidding: Time-Consuming

Earlier when I talked about control, I already discussed the hard work trade off that rule-based bidding brings along. And like any hard work, it takes time:

• You need to set up the thresholds and make sure your rules don’t conflict
• A good overview is a must
• Every time you make a significant change, you first need to prevent contradictory actions. This means you have to make sure what impact that change has on all the other rules.

For example: keywords might compete with each other. Or the budget you spend on one keyword, can’t be spent on another. This can easily result in either suboptimal budget allocation or exhausting your budget altogether.

You need to keep a very detailed overview of your bidding. You should also invest substantial amounts of time and attention to your rules and how they interact with each other. You need to make sure they always work to your benefit.

If you won’t, this PPC bidding option will most likely work to your disadvantage.

Algorithmic Bidding: Time-Saving

One of the biggest advantages of algorithmic bidding is saving you your precious time. Forget keeping a detailed overview over your rules, bidding and whatnot.

With automatic bidding ALL that happens automatically. The best part? It also works 24/7.

4. What Wins Low-Data Scenarios?

You just started your advertising adventure. Or you are constantly launching new products. In both cases, you don’t have historical data.

You might be wondering: how does this relate to PPC bidding? When you’re starting from scratch, with little or no performance data there are many moving parts.

There is a lot of uncertainty about how your intended audience will react. Let’s have a look at both bid management options and see what each of them offers.

Rule-Based Bidding: Missing Starting Points

In cases where there is little or no data, rule-based bidding isn’t the strongest. When there are no conversions rule-based bidding can find that tricky to handle, and can’t make much of it.

Your PPC bidding is pretty much an empty canvas. You have to go through lots of trial and error to figure out what works for PPC campaigns of your newly launched products.

You should ask yourself – do I have the skills, time and energy to do all that?

Algorithmic Bidding: Falls Back On Other Available Data

On the other hand, even if there is little or no data, a PPC algorithm can:

• See the full picture
• Experiment
• Leverage the data of past experiences or similar products, ads, keywords, etc.
• Uses other successful advertising stories from your ad account

5. PPC Software: Rule- or Algorithm-Based?

The last point I will cover is PPC software. Neither of the PPC bid management options is a standalone feature, it is always a part of a PPC software.

There are excellent PPC tools and solutions for bidding optimization out there working on both ends of the spectrum. If you’re willing to put in the time and effort, I am absolutely certain you’ll find the one that best suits you and your unique business needs.

Either path you decide to try first, I recommend one thing: patience. Very few things in life come immediately, and the same goes for online advertising performance improvement.

Make sure you manage your own expectations. Give your PPC bidding experiments sufficient time. This way you will get a good sense of what’s working for your PPC campaigns and what isn’t.

Final Thoughts

Which PPC bidding option is better? Rule-based or algorithmic bidding? Well, this depends on who you ask.

I admitted our bias towards algorithms to handle your online advertising bidding. We do recognize not everybody might be ready to give up the control. If you want to see how algorithmic bidding works, start a free 30-day trial.

Based on five different aspects of PPC bidding, I compared algorithmic bidding and rules based bidding and presented their pros and cons. Hopefully you now feel more empowered to make an informed decision that suits you best.

Which PPC bid management option do you prefer?

Let me know by sharing and commenting on this post on Linkedin, Facebook, Instagram, or Twitter.

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