New Search Marketing Player Applies Portfolio Theory

A new search marketing firm, Efficient Frontier, launched Friday with an innovative technology and approach. The company, headed by ex-Yahoo executive Ellen Siminoff, uses concepts borrowed from financial portfolio management to maximize keyword campaign results.

Though the company can’t name its existing clients, it’s working with three of the top five brands on the Internet and already has more than 2 million keywords under management. Siminoff, who was senior vice president of small business and entertainment at Yahoo before her departure in 2001, says the company is trying to solve one of the biggest problems in search marketing: how to be efficient at scale. That’s why it’s going after clients who are spending $40,000 to $50,000 a month on search.

“Search marketing is proving to be incredibly valuable for marketers who want to allocate more of their budgets to it,” said Siminoff, who is president and CEO. “The channel is growing in complexity, and we want to help companies continue to realize the full potential of this media.”

Efficient Frontier’s technology treats a company’s keyword set as a portfolio, predicts what the return on investment will be at different bid prices, and allocates the budget accordingly. The company says it will bid “as frequently as necessary to maximize portfolio performance.”

“This changes very dynamically because the marketplace changes,” said Siminoff. “Your return metrics change, also.”

Executives describe it as an algorithm-based approach, distinguishing it from rules-based technologies such as that from aQuantive’s Atlas Search. Efficient Frontier handles only the bid management part of search marketing and expects to partner with other agencies that will take care of creative and landing pages.

“I think the biggest competition is people who think they want to do it internally and don’t know how complicated it is,” Siminoff said. “It’s really complicated. I think people don’t realize that. Some of them have to fail before they realize how hard it is.”

Efficient Frontier has been in research and development mode for about a year, picking up venture funding from Redpoint Ventures and Cambrian Ventures in December 2003.