Wednesday, March 22, 2006

Efficient Frontier Pay Per Click Advertising Purchases

I have worked on a Wall Street trading desk and have also done a fair bit of Internet marketing. With the prices of prices cost per click (CPC) advertising going through the roof and the additional networks being added by MSN and Ask, it has become much more difficult to effectively execute a profitable CPC campaign. In a lot of cases I have suggested to my clients that we focus our efforts on other forms of marketing because CPC is just not making the ROI hurdles.

I read this article in Business 2.0 today and was intrigued by Efficient Frontier's approach to CPC advertising. I strongly believe that Efficient Frontier is worth a look for large advertisers. Below is an excerpt from the article that I found most intersting:

So Siminoff was intrigued when she met Efficient Frontier's founder, Anil Kamath. A Stanford computer science Ph.D. and the founder of eBoodle, a comparison-shopping startup ultimately acquired by BizRate, Kamath was creating a system to help advertisers more effectively place their text ads on Google and Yahoo, both of which conduct online auctions of search keywords that determine where the ads appear. Employing vast computing power and fiendishly intricate algorithms, Kamath's system would indicate which keywords to bid on and the optimal amount to bid--based on countless variables, from past click-through performance to the number of rival bidders, while taking account of constant fluctuations in auction prices.

All this should sound familiar to anyone acquainted with the incursion of computer-driven quantitative methods that transformed high finance in the 1990s. As Siminoff puts it, "Anil's approach was based on the same sort of math they use on Wall Street." (Before starting eBoodle, Kamath was a vice president at D.E. Shaw, a hedge fund that specializes in applying quant-jock models to program trading.)

"Google and Yahoo are like exchanges, so the analysis is essentially similar," Siminoff says. "You're studying all of the potential scenarios and choosing the ones likely to yield the best ROI in aggregate. Then you just keep iterating and refining the analysis."

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