Bringing Street Smarts to Search
Ellen Siminoff, a member of the executive team that founded Yahoo!, is bringing Wall Street tactics to paid search.
The company of which she is now president and CEO, Efficient Frontier, takes its name from the investment concept that underlies the art and science of investment portfolio management—the notion that in any mapping of investment opportunities, there’s a thin line of possibilities that produce maximum return for a pre-set level of risk. That’s the approach Palo Alto, CA-based Efficient Frontier is bringing to search engine management: Companies with a lot of keyword bids to be managed should be able to spend their time making strategic decisions about the rate of return and cost per account (CPA) they want to achieve, without having to spend their time making the actual tactical decisions about specific keywords and bids to get to those goals. In other words, they set the portfolio goals, communicate those to Efficient Frontier, and let the management company put its algorithms to work reaching those goals on a day-to-day, week-by-week basis.
Paid search is a valuable tool for marketers because it’s controllable, measurable and predictable, says Siminoff. That value also has served to make search engine marketing more complex—and more expensive—very quickly. “Now search engine marketing is not a secret anymore,” she says. “People know that Google and Overture work, and they want to participate.”
But doing SEM widely is complicated because each search engine has different rules: different keyword lists, conversion rates, paradigms for which marketers can bid. Some are transparent, others—such as Google, Siminoff say—are relatively opaque. For each of these differing search universes, a would-be marketer has to bridge the gap between the bid, or the cost per click, and the cost per account—the percentage of revenue that will be spent on marketing.
In the face of that growing complexity, a company may decide that adding a staff to manage search engine marketing in-house may be too far from its core competence. Or they may opt for a rules-based solution such as Overture. Problem is, says Siminoff, those solutions can just shift the complexity from basic management to administration. “You the marketer are still the guy who has to make all these rules decisions at the individual keyword level, and then get out your spreadsheet and figure out if you made the right decisions.” Rules-based solutions, she says, offer a pretty interface but are still labor-intensive and don’t lead to smarter, more cost-effective bids.
Efficient Frontier’s solution is to apply portfolio management techniques adapted from the stock market. In effect, this approach allows users to ignore the performance of individual keywords and focus on strategic concerns—that is, getting the overall metrics for the optimal CPA. Efficient Frontier looks at specific keyword performance for its customers, but tailors bids according to the goals set for the customer’s portfolio of keywords. “If you say ‘I don’t care about performance as long as my CPA is $10,’ then that’s how we optimize,” Siminoff says. The company currently has relations with paid-search engines Google, Yahoo! and Findwhat.
It’s the same big-picture approach that underlies hedge-fund management on the Street. That’s appropriate, since company co-founder Anil Kamuth came out of D.E. Shaw & Co., a prominent hedge-fund trading company. Siminoff herself thought enough of its potential to leave post-Yahoo! retirement to head the company that promotes it. “After six years at Yahoo!, I was only going to do something that was exciting,” she says. “I got to know the guys here and the concept, and those things were attractive enough to get me off my butt and off the golf course.” For the service it provides, Efficient Frontier charges a monthly fee, and its approach has been impressive enough to attract the business of 35 of the 200 top-spending name brands involved in search marketing today, Siminoff says. That’s led the company to take charge of millions of revenue events per day for its customers and to buy in enough volume to get them some substantial discounts. One of Efficient’s current clients asks it to keep watch over just under 200 different events each day.
While the solution is scalable and would be appropriate for anyone engaged in paid search, she allows that the subscription model is probably only cost-effective for companies actively managing more than 500 keywords right now and spending $60,000 or more a month to do so. But since Efficient Frontier’s technology is proprietary—with patent applications published in August 2004—is there an opportunity to devise a stand-alone, off-the-shelf model that could be licensed or sold to smaller companies? “That’s a possibility,” she says, “and something that we will definitely be looking into for the future.”
