Optimization buying strategies
Important
This guide only applies to the legacy line item. If you are using the augmented line item (ALI), see Optimization Guide - ALI.
There are two primary types of optimization buying strategies: Managed and RTB. Not all buying strategies use optimization to determine a bid amount. You may also set a Performance Goal bidding limit on your line item that works with any buying strategy in Managed and RTB. It is therefore critical that you understand which buying strategy the network is using.
Refer to Buying Strategies for additional information.
Managed
Managed buying refers to a situation where a network is buying inventory from a publisher with which they have a financial relationship. This is also known as Buying Direct Inventory. Managed bids are always based on the line item booked revenue. Only one Managed bidding strategy utilizes optimization:
- CPC or CPA booked revenue We use the CPC or CPA value specified on the line item as the performance goal in our algorithm to determine what an impression is worth in terms of a CPM value.
RTB
RTB buying refers to a situation where a network is buying inventory from publishers with whom they do not have a direct financial relationship. This is most commonly done on a pay per impression basis (called CPM payout). This is also known as Buying Third-Party Inventory. RTB bids are always based on the cost of serving impressions.
The following buying strategies work for buying third party inventory that utilize optimization:
Optimize to a predicted CPC or CPA goal This strategy applies the specified goal (CPC/CPA) to the optimization algorithm to calculate a CPM bid. The optimization algorithm determines a bid based on the assumed value of a click or conversion and based on past click-through rates or conversion rates.
Note
When your line item booked revenue is CPM but you want your campaign to optimize to a CPC or CPA goal, for best results, use the Performance Goals section on your line item to set a CPC or CPA performance goal. Then use Optimize to a % Margin of Booked Revenue as your campaign buying strategy.
For more information, see Understanding Performance Goals and Using Performance Goals with CPM Booked Revenue.
To learn about setting up Performance Goals, see Add a Performance Goal to a Line Item.
Optimize to a % margin of booked revenue: There are two types of booked revenue:
CPM booked revenue This strategy does not use optimization.
CPA/CPC booked revenue With this method, the system applies the desired margin, then applies optimization to achieve that predicted goal. Example: If you select a 60% margin of booked revenue and the line item booked revenue is $10 CPA, the system optimizes to achieve a $4 CPA goal.
This strategy requires the line item booked revenue to be a known value. It is not possible to optimize to a % margin of booked revenue if it is set as Cost Plus, or if booked revenue is not being tracked.
Pay on a Per-click (CPC) basis or Pay on a Per-conversion (CPA) basis When choosing a Cross Net CPC/CPA bidding strategy, the user must specify what they are willing to pay per conversion (CPA) and/or per click (CPC). The optimization algorithm then uses this value to calculate a CPM bid. This payment type is only accepted by Microsoft Advertising sellers who choose to enable this payment method, so selecting this buying strategy exclusively limits the inventory available for a campaign.
Note
The ability to combine CPM booked revenue with either the Pay on a Per-click (CPC) Basis or the Pay on a Per-conversion (CPA) Basis buying strategy is being deprecated soon. Although this combination will remain functional for existing campaigns, you will no longer be able to use this combination on new campaigns or duplicate existing campaigns that use it. For best results, use the Performance Goals section on your line item (Create New Line Item > Basic Settings > Performance Goals or Edit Line Item > Basic Settings > Performance Goals) to set a CPC or CPA performance goal. Then use Optimize to a % Margin of Booked Revenue as your campaign buying strategy.
For more information, see Using Performance Goals with CPM Booked Revenue.
To learn about setting up Performance Goals, see Step 6 of Create a Standard Line Item.
For all RTB pay-per-impression optimization buying strategies, you have the option of specifying a min CPM and a max CPM.
- If you set a min CPM for a campaign using optimization and the algorithm determines your bid is below this amount, the campaign will not bid on that impression.
- If you set a max CPM for a campaign using optimization and the algorithm determines your bid is above this amount, the campaign will bid on the impression at the max CPM price (not at the price calculated by the algorithm).
The Cadence Modifier and the Chaos Factor is automatically enabled for buying strategies that do use optimization, as cadence is an important feature of the optimization algorithm.
Performance goals
When creating a Line Item, you can track how well the campaigns that belong to that line item are doing against the performance goals give to you by your advertiser. If you elect to set a bidding limit with your Performance Goal, all campaigns buying underneath that line item will go through a bid decisioning logic. The bid decisioning applies to all buying strategies, regardless if they are an optimization buying strategy or not. For more information, see Step 6 of Create a Standard Line Item.