Ads API Profile: Efficient Frontier’s Portfolio Management Across Channels

Facebook’s performance advertising system is quickly becoming an essential part of any marketing mix. To allow companies to build more powerful tools for designing, targeting, and managing Facebook ads, the company gave a limited number of developers access to an ads API last fall. Advertisers seeking to optimize ad bids across channels using portfolio theory can do so using Efficient Frontier.

A mature marketing management platform, Efficient Frontier developed its ads API tool to use the same applied portfolio theory it had be using in its system for paid search and display ads clients. It tested the beta of its Facebook tool for a few months with several existing clients interested in getting more conversions from Facebook on the same budget, or the same volume of conversions for less.

The core of Efficient Frontier is a system which models the potential return for any ad, automatically bids in response to the potential, and then optimizes that bid against other channels where that money could be spent. Unlike other ads API tools which are rule based, the portfolio-centered system “models expected performance for different bid levels and places the optimal bid”, allowing advertisers “to bid down when it’s less important, and bid up above the threshold of [the] max bid when it gets [them] the best position, so it could give [them] more conversions for the same cost” says Justin Merickel, Efficient Frontier’s VP of Marketing and New Product Development.

Company Profile

Efficient Frontier was founded by Anil Kamath in 2002. Before starting the company, Kamath worked as a vice president of a hedge fund, where he honed the skills and understanding used to develop Efficient Frontier’s risk-return portfolio model. Headquartered in Sunnyvale, CA, and with offices in New York City; London, Paris, Hamburg. and Teynampet, India, Efficient Frontier now has 50 full-time engineers. The company’s latest funding round was a $6 million Series C led by Mitsui & Co., and joined by Redpoint Ventures and Cambrian Ventures.

Efficient Frontier  handles $1.2 billion a year and sets 5 million bids a day across paid search, display, and Facebook ads. Its 250 clients include some agencies, but mostly consist of direct advertisers representing industries including performance marketing, financial services, travel, retail, and automotive. Salesforce.com, Discover Financial Services, Capital One, Crate and Barrel, Match.com, and Travelodge are some of its clients.

There is no minimum spend necessary to use Efficient Frontier, though the company prefers enterprise-class marketers. Most of its clients spend $100,000 a month across channels. Efficient Frontier doesn’t publish a rate card, but the percentage of total spend they charge is tiered by total spend by the client.

Efficient Frontier allows advertisers to integrate their search engine account data, ad exchange campaigns, web analytics, paid search, display ads, and now social media spend. By managing all marketing channels on the same platform using a unified portfolio system, the platform can fluidly allocate budget to where cost per acquisition is the lowest.

Efficient Frontier for Facebook Ads

The new “Social” tab of Efficient Frontier currently allows advertisers to run Facebook ads, but the company says it is also looking to provide LinkedIn and Twitter ad management in the future.

Portfolios

Clients can create a different portfolio for each performance metric for which they want to optimize. Within a portfolio, campaign budgets are dynamically shifted to provide the highest return for the selected metric. For instance, clients would set up one portfolio for attaining exposure, measured by impressions or clicks, and another for conversions or acquisitions, measured by sales or CPA.

Once a day, Efficient Frontier calculates what would happen if each ad’s bid was increased or decreased, and alters spend to optimize for the desired metric. On any given day, Efficient Frontier may spend more or less than what that day is paced for in the total budget. Over time, though, the difference between the predictions and the actual traffic won’t exceed 10%.

Merickel explains that Efficient Frontier’s strategy is “once clients have manually configured [the portfolio], let the machine do the math and make the right decisions.”

Creating, Posting, and Editing Ad Variants

From the “Campaigns” sub-tab, clients can see attributes of the campaigns they are running, such as activity status, creatives currently running, impressions, and clicks. Campaigns can be edited, and performance charts can be viewed.

Selecting to add a campaign gives clients standard ad creation options as well as a choice of which account they want to run the campaign under, language targeting, and the ability to upload creative images or choose from a library of their previously uploaded images. Multiple different age ranges or single years can be selected and added as variables. As clients input location and demographic targeting, the estimated reach of the campaign can be refreshed.

Efficient Frontier automatically predefines proximity targeting radiuses for easy yet sophisticated location targeting. Suggestions of colleges, majors, and graduation years are provided for education targeting.There is currently no typeahead or suggestions for selecting Likes to target, though Merickel says this will be available in a release coming at the end of November.

Each set of variables, such as age range or interests, is aut0-split into separate variables for each year or interest and multiplied by the rest of the targeting options to instantly create thousands of permutations of the ad. For example “Likes Hiking” and “Likes Camping” are both targeting variable which are seperately applied to all others, instead of a single variant which serves ads to people who have either interest. This allows for refined reporting and unique bids for every target.

All the permutations are placed in a bulk sheet which can be posted immediately, or scheduled to run at a later date. Bulk sheets can be uploaded and downloaded as .txt, .csv, or .zip files for desktop editing, even after they are posted. One unique feature of Efficient Frontier is landing page validation, which checks all of the destination URLs in the bulk sheet to ensure they are working properly and not returning an error page.

Reports

Cross channel reports on a variety of conversion metrics can be scheduled and sent from Efficient Frontier. Different visualizations of the data can be viewed within the platform, reducing the need to constantly export reports to Excel in order to deduce high level trends.

Options for reports include which channels should be included, and whether conversions are tracked by click or transaction date. Clients can choose conversion metrics usch as CPA, CPC, and cost, as well as custom metrics such as sales of a specific product. Since Efficient Frontier auto-splits every parameter into different variants, reports can be filtered by any targeting variable, providing extremely granular data despite all the variants being created at once.

Efficient Frontier also includes an Integrated Performance View which shows paid traffic alongside organic search, direct traffic, and mobile traffic. When integrated with reports simulating how money could spent on different channels, budget allocation insights reveal where the highest returns can be found.

Optimization within a Budget for Multi-Channel Marketers

Merickel believes that the Facebook Ads API “is not the most stable of APIs. They release daily. They’re in rapid development mode”, though he says its stable enough to build on. He wonders whether Facebook will charge a fee for use when it is publicly rolled out.

One issue Efficient Frontier has had with the program is that the creative approval process is inconsistent. What copy is allowed or rejected differs, making it difficult to predict whether an ad is safe to submit.

Merickel says he wishes Facebook would provide interest targeting suggestions, such as other Pages that many users who Like a currently targeted Page also Like. He also says some transparent way of offering frequency capping or impression tracking  would help advertisers known when users are seeing the same ad and know when to rotate creative elements.

In the future, Efficient Frontier seeks to add automatic look-alike targeting. This would take a successful interest, demographic, and location combinations and expand those campaigns to target other similar interests. For instance, if a campaign targeting those who Like a specific romantic comedy movie was successful, it would automatically try targeting other romantic comedies.

Overall, Efficient Frontier is a good choice of an ads API provider for multi-channel advertisers who want the highest returns regardless of channel for their dollar. The company’s powerful targeting auto-splitting, native data visualization, and automated portfolio bid management system help advertisers run effective campaigns without constant attention to the data.

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