In the last couple of weeks the competitor and brand bidding debate has once again reared its ugly head when Basecamp.com ran this controversial ad below.
The ad fires back at Google over the fact that Basecamp has to pay them what they called a “ransom” so that they appear at the top of the search results.
I’m not going to go into whether Basecamp’s views are right in criticising Google, that’s for people to make their own minds up on.
But I did want to share a simple framework that we use at Clicteq when we get asked the question, should we bid on our own and competitors’ brand terms?
I’ll also simplify the key themes from the thousands of articles out there that talk about the pros and cons of bidding on your own brand or your competitors into one test.
Game theory: How will competitors react to competitor bidding?
When it comes to whether or not you should bid on your competitors’ brand terms, you can use basic game theory.
This is where you model all of the potential outcomes of bidding on different competitors’ brand terms and predict how they are likely to respond.
The theory assumes that in competitive markets each player, in this case a competitor, will look to maximise their own outcomes.
For example If you bid on competitor A’s brand terms and they get more brand searchers than you, they are likely going to first ask you to stop, because they would be at a loss bidding back on your brand terms as you have fewer searches.
They are then, if you fail to stop, going to start bidding on your brand terms to negate their loss and maximise their outcomes.
You can use simple models like this to predict all of the different outcomes of bidding on different brand terms, and seeing if you will be at a net positive or loss in terms of traffic by bidding on them.
My simple two part test for brand bidding
The first test that I use is as follows:
1) Do my competitors have more brand traffic than I do?
Say for example you’re a challenger brand selling cyber security software competing against the incumbents in the industry, like Macfee or Norton, that have more brand search volume than you, then it makes sense to bid on their brands and be more aggressive.
Using a simple model of game theory where you expect that other players, in this case the competing companies, will maximise their outcomes, you can expect that they will start to bid on your brand terms.
Therefore you will have to bid on your own brand terms to ensure that you appear at the top when people search for you. However, because you have less to lose – as you have fewer searchers, you will win overall provided that you have a strong proposition.
Compare that to the other end of the spectrum where you are a large incumbent cyber security company like Norton with considerably more search volume than some of your smaller competitors, then you will probably not want to bid on competitor brands (unless they are bidding on yours already).
Here you will instead want to use a more defensive strategy as you’ve got more to lose. Bid to 100% impression share on your own brand to ensure that you’re found above the competition to reduce the effectiveness of their ads at taking your clients.
If there is nobody bidding on your brand and you appear in position 1 organically then it’s best to invest your ad budget in other areas and abstain from brand bidding.
2) Does it fit our brand strategy?
In certain industries and cases, brand bidding would not be considered appropriate. For example in the legal sector you’re unlikely to see brand bidding as it wouldn’t fit most law firms brand strategy, it’s just not what they do.
This is generally the case in most services based industries where it is a fairly small world and people have close personal relationships with clients and other competing firms that they will probably work alongside frequently.
Contrast that to some of the high competition product based markets like credit cards and you’re likely to find that it’s rife with brands aggressively bidding on each other.
It’s also worth remembering that you’re likely to upset the people in the company whose brand you’re bidding on, this should be taken into account as part of your brand strategy.
Conclusions
If you’re considering brand bidding, using game theory to model out all of the potential outcomes is a great way to determine if brand bidding will be profitable for you.
Generally speaking if you are a challenger brand and your competitors have considerably more traffic that you, bidding on competitor terms will be profitable for you.
By contrast, if you get more brand searchers than your competitors it will make more sense to be defensive and bid on your own brand terms to ensure you appear above any competitors bidding on your brand name.
Finally you’ve got to ensure that brand bidding fits into your brand strategy. It’s also worth remembering that it’s likely going to upset your competitors so if you’re on good terms, don’t expect that to continue!