Portfolio Theory

Developed by a Nobel Prize winning economist, Portfolio Theory uses mathematical models to weight risk and return across numerous variables. When applied to Search Engine Marketing (SEM), the portfolio theory based solution returns an optimal combination of bids that mathematically targets the highest return for every advertising dollar spent. This sounds complicated, and it is. But the ways that search engines weight keywords is also extremely complex. In fact, even when managing only a handful of keyword combinations (i.e. portfolios) the mathematical complexity grows exponentially fast - and the number of combinations in a typical SEM program quickly overwhelm other simpler approaches.

The level of complexity associated with an SEM campaign clearly demonstrates the need for a scalable technology

Efficient Frontier applies cutting edge mathematical methods to optimize SEM campaigns using Portfolio Theory. These methods, known as algorithms, address the inherent complexity of the portfolio approach while not making any compromise on performance. For Efficient Frontier's clients, the benefits of using this advanced math-based technology go beyond streamlining and automating the bid process. It actually delivers significantly better ROI. This is because, unlike other approaches that look at the effectiveness of individual keywords, Portfolio Theory looks at all the keyword combinations holistically to identify the best configuration.

Efficient Frontier's portfolio theory algorithms are remarkably dynamic. They automatically adapt to changing marketplace conditions to ensure optimal performance even in times of high uncertainty and volatility. Rules-based SEM approaches - such as bidding each keyword to a target CPA goal or target ROI - differ from algorithms in that neither do they guarantee optimal results nor do they adapt to marketplace volatility. This portfolio management approach, which is built on optimization that leverages robust keyword mathematical models, is the key to maximizing SEM campaign performance. In addition, only Efficient Frontier's models-based portfolio management approach has the ability to accurately forecast campaign performance so that you can predict how your search campaigns will perform for differing marketing goals.