How AI-powered bidding works

AI-powered bidding automates and optimizes how much you pay for ad placements. The process will save you a lot of time and money compared to manual bidding. But how does it work? Let's find out.

AI has revolutionized marketing and advertising. It can help with ad placements, data collection, and creating more personalization for customers. However, one of the most exciting uses of AI in advertising involves optimizing the ad bidding process.

Let’s explore what AI-powered bidding is, how it works, why you need it, and discuss any drawbacks you need to consider.


What is AI-powered bidding?

If you’ve run Google, Meta, or Bing search ads before, you’ll be familiar with the concept of the ad auction. For anyone unsure, let’s explain the processes briefly.

1) A user enters a search term

2) Ads that are eligible for that search term enter an auction

3) Based on the auction results, the ad will show to the user in a particular position on the page or won’t show at all.

One of the most significant elements that affect whether you win the auction is the level of your bid compared to other people bidding for the same ad space. Ad Quality Score is another factor that Google and Meta consider when determining your ad rank. But that’s something we’ll get into another day.

What level you set your bid at depends on the value you attribute to each keyword. For example, you can cap how much you’ll pay for a click based on the average level of revenue each click brings your business.

Now, you can place the bids manually and hope it all works out. Or, you can implement a dynamic bidding strategy powered by AI.

When you use AI-powered ad bidding, it will perform two main tasks for you:

  • Automated the ad bidding process
  • Optimize your bids so that you get maximum value from your ad spending


How does AI-powered bidding work?

There are lots of different factors involved in an ad auction. You need to think about the keywords, the price of the bid, and what you’re setting out to achieve.

Then, you also need to consider the customer and their demographics, location, interests, devices they’re using, past behaviors, and search intent. Finally, there are environmental factors, such as the time of day and year.

All in all, there are a lot of data points swirling around. Understanding, analyzing, and processing all that data (and how it relates and interacts with each other) is beyond humans. But it’s a perfect job for AI.

”Using a combination of AI tools, like machine learning algorithms and deep learning, AI can get good at finding patterns in the data and connecting products with users’ search intent.”

AI-powered bidding tools analyze all this data with algorithms, which are like a set of instructions for solving a problem. In the case of ad optimization, that problem could be something like “how to get the most conversions from this ad” or “how to get an acceptable number of ad conversions but pay the lowest amount.

Based on what goals you need the AI to achieve, it will build models that allow it to perform your objectives. As a result, you can set goals, objectives, and max bids and let the robot on its way to grind out some results.


What are the benefits of AI-powered bidding for advertisers?

AI-powered bidding has grown in popularity in recent years because it has many great benefits. Here are a few that can really make a difference for your brand.

#1. Saves time

The automation aspect of AI-powered ad bidding is one of the most attractive benefits for busy owners. Instead of pouring over data and trying to match keywords to intent, you can outsource that heavy lifting to a robot.

Dynamically adjusting bids involves a considerable investment of time. If you have a lot of products, it’s probably too much for even a team of people to stay on top of.

AI-powered bidding does everything for you. You still have control over some settings and parameters. But once you’ve got it going, you can concentrate on your core tasks and wait for the conversions to roll in.

#2. Better results

Manually setting bids can involve a lot of guesswork. Sure, you know the maximum you can pay for a bid to turn a profit. But winning the auction (and the right customers) is about outworking your rivals.

AI-based bidding tools can help you get the maximum value from each conversion and ensure you don’t overpay, which means better ROI and ROAS.

#3. Better timing

Timing is everything. AI-powered tools consider many signals and contexts and adjust bids based on those conditions. The results are high-performing and cost-effective bids.

#4. Deeper understanding

As mentioned earlier, efficient auction bidding requires an awareness and understanding of an incredible amount of data, which isn’t even accessible to manual users. AI-powered ad bidding tools can analyze massive data sets, infer intent, and find underlying patterns in behavior.


How does AI-powered bidding compare to human bidding?

It’s no real contest. There are too many variables involved for the human mind to take in.

Robots aren’t creative. They need inputs and instructions. Ad auctions have a lot of data points, and ad bidding is based on finding underlying patterns and statistics. That’s a domain AI really excels at, which is why it’s so popular for ad bidding.


What are the potential drawbacks or limitations of AI-powered bidding?

Nothing is perfect in this world, and even AI-powered bidding has some drawbacks and limitations you must consider.

  • You need data: If you’re a new account, you might not have enough conversion data for an AI-powered tool to make confident predictions.
  • Less control: Outsourcing any task means giving up a bit of control. While this is fine in most scenarios, people can be concerned about a robot spending their budget. So, we recommend setting some limits and monitoring the campaign.
  • Limited transparency: You won’t be able to micro-manage an algorithm and don’t know everything it does (because usually, it can be quite a volume). However, they outperform humans, so sometimes you need to trust the process.


Final thoughts

AI-powered bidding helps marketing teams save time and get more value from their advertising budget. We built Amanda AI so you can automate and optimize the ad bidding process and outwork your rivals, even if they have deeper pockets.

Customer acquisition costs are rising. If you find you’re overpaying for clicks relative to the revenue they generate, AI-powered bidding could be just what you need to turn the ship around.

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