To “Portfolio” or “Not Portfolio”?

Over the last few years there has been a lot of attention in the paid digital world over the “Portfolio” approach to paid search campaign management.  Some view this as way to maximize opportunity, while others try to draw analogies with stock portfolios as a way to manage risk.  Unfortunately, there is still a lot of confusion over what a portfolio approach is and whether it is actually good or bad.  And that is not surprising, as the definition of a portfolio approach changes depending on who you talk to.

Most portfolio approaches look to move above the keyword level of granularity in order to broaden audience exposure and to “pull out of the weeds” of keyword-level detail.  On the face of it, there is real value in doing this. It is common to have many keywords with very little engagement data. Assessing small data sets is tricky, so this broader view may make it easier to identify trends or performance numbers.  A broader view can also help in identifying performance issues in relatively short time periods, where, again, there may be little data at the keyword level.

But here is where it breaks down.

Some companies use Portfolio approach in a way where an average performance number of an aggregated number of audience segments is used instead of more granular data, even when the more granular data is actionable.  For us, the word “average performance number” is a huge red flag.  Audience segmentation is at the heart of gaining efficiency in digital campaign optimization, but this type of Portfolio approach goes in the opposite direction. This can lead to a very dangerous effect: subsidized performance.  Subsidized performance is when a poorly performing audience is masked by a strongly performing audience through the use of an average performance number.  Want to make your non-branded campaigns look good?  Fold their performance in with your branded campaigns.  Want to make PPC look good?  Fold in the organic performance (and sales) numbers.  Subsidized performance lurks everywhere, and it is important to be able to pick apart the average value to improve performance.

So, is Portfolio a bad approach?  Our take is that one should proceed with caution.  We work at the level of actionable data, which means that what we might call a Portfolio will change depending on how we are using the data, so we don’t tend to describe our approach as Portfolio. Since many Portfolio campaign structures (in bid management tools, for example) tend not to be picked apart for optimization purposes, and what constitutes a individual portfolio cam be very subjective, we’re wary of canned approaches described as Portfolio.  A more fluid approach that works at the level of actionable data will be far more useful in avoiding subsidized performance and finding true gains in profitability.