In general, the term bid management refers to the control of advertisements in the area of SEM. In particular, Bid Management refers to a software that automatically controls advertisements in large campaigns using complex algorithms. This is referred to as bid management tools.
In addition to keyword management and the content orientation of campaigns and advertising texts, bid management is one of the most important areas for measuring and increasing the success of SEM. Bid Management aims to align budget planning with keywords, ads and campaigns. More precisely, a budget can be specified for each keyword and automatically adjusted in the case of a bid management tool. For each keyword, the best bid is determined and distributed to different paid search providers.
Bid management can be geared to various objectives:
1.) Maximize clicks: Here, the keywords are selected by the system in such a way that they are cheap (cf. cost per click), but the traffic is increased. For example, ads are also placed for keywords that do not promise a high conversion rate.
2.) Conversion optimization: Only keywords with a high conversion rate are used for placing ads. Conversion tracking is used to determine the performance and value of keywords. This tracking is already included in most bid management tools.
3.) Maximizing profit: In general, this is also an optimization of conversion, but with the important difference that the value of certain keywords is used as a parameter to select only keywords that are likely to generate a high profit.
In connection with bid management, terms such as ROI and ROAS are also used: in relation to entire advertising campaigns, effectiveness and the budget used play a decisive role. In relation to individual advertisements, the financial means used are interesting, for example, to change ad texts and keywords if they are not effective enough.
Bid management tools work according to different principles. There are rule-based, portfolio-based and self-learning systems. The former have a set of rules that are determined in advance. Some systems are tailored to the portfolio: The performance of the entire system is optimized. In self-learning systems, the effectiveness of certain rules is measured and, if necessary, modified by adding rules or omitting rules when seasonally appropriate.
In practice, bid management can be performed by both programs and SEM managers. Both have advantages and disadvantages. While a system can only react on the basis of collected data, the SEM Manager acts more intuitively. If the conversion rate of a particular keyword breaks down because an item is no longer available or sold out, the system responds with an algorithm that is not necessarily applicable to the problem. An SEM manager usually knows that a particular product is sold out and changes its keywords and campaigns in advance. The system can only react.
This becomes problematic if the defined rules of a bid management tool lead to a so-called downward spiral: The rules minimize performance because they are not or cannot be adapted to real-world requirements. Experts argue that bid management is not fully automated, but only used to simplify or optimize certain processes - especially for large campaigns and ad groups. 
Bid management aims at optimizing landing pages. Certain keywords are supposed to achieve a high conversion rate and special websites can benefit from this optimization, as the keyword characteristics are known in Bid Management. SEO's do not only have the estimated values of the AdWords keyword planner available, but also validated data which keywords are promising and which are not. Basically, it is about finding out which keywords work and distributing them to the paid and organic sector in a meaningful way.