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Both MSN and Yahoo allow advertisers to modify bids on the basis of demographic data.  In this article, I will explain how MSN is able to do so, and how we, as advertisers can get the most out of this feature.

How MSN Gets Demographic Data
Many, if not most, of the searches on Microsoft's Live.com come from users who are logged into their MSN/Microsoft account for Hotmail, Instant Messenger, LiveSpaces, etc.  Because these users are logged into their accounts, Microsoft's ad serving system can leverage these users' profile data to target ads to them.  When users create an MSN or Hotmail account, they are asked to enter a lot of information about themselves.  Notably, Microsoft asks users to (optionally) provide their age, gender, and estimated household income.  So, for searches done by those users who are logged into their MSN/Microsoft accounts, and who have elected to specify this demographic data in their accounts, it is possible for MSN to offer advertisers demographic-based bidding.

How Demographic Bidding on MSN Works
The demographic bidding option appears in the MSN advertiser interface on the Keywords tab of the management page for an individual ad group.  It is an ad group-level setting that affects all keyword bids in that ad group.  At the bottom of that page, there is a section called Set incremental bids for targeting.

If you click on Bid for location, day, time, age, or gender, a set of targeting options will appear in the space below.

Setting a non-zero value in any of these fields will make your effective bid be the original bid plus the amount you specify.  So, if you bid $1.00, and you specify a 30% incremental bid for males, then your effective bid for male users will be $1.30.  If you also set an incremental bid of 70% for the 50-64 age group, then your effective bid for a 55-year-old male would be $2.00 (base bid + 30% + 70%).  Referring to the screenshot above, your effective bid for a 40-year-old woman would be $1.50.

Please note: if you use Clickable, the demographic incremental bids will apply over and above the bids you set via Clickable.

Who Should (and Shouldn't) Use Demographic Bidding
Demographic bidding adds some additional workload to your campaign management efforts.  The additional management load is probably not worthwhile if you're promoting a product or service for which customers from different demographics are equally valuable. However, there is a high potential payoff if it allows you to more precisely target your audience and get more traffic from the most valuable demographic segments.  For example, if you're advertising "nursing homes"- you may want to adjust your bids higher for older individuals, who are more likely to be in the market for this service.  If you are advertising for "car dealership", you may also want to pay more for older individuals who are likely to buy more expensive cars. 

Note that in both of these cases, the bid adjustment is advisable not because more people from the target demographic search for that keyword, but because when they do, they are worth more than people from outside the target demographic.  Demographic bidding is about paying more and getting more clicks from the highest quality demographic, not necessarily the largest one.  If you are a Plastic surgeon advertising on the keyword "Rhinoplasty" and your clients are 75% female, this does not mean that you should use demographic bidding - a man who wants a Rhinoplasty pays the same amount as a woman, and his click is worth the same amount to you.

Finally, if you choose to use demographic bidding, remember there are many, many searches on MSN by users who are either not logged in or who have not specified the relevant demographic data in their accounts.  This means that your default, non-demographically adjusted bids will be used most of the time.  Do not assume that all of your ads will be served based on demographically modified bids.

Ehren, SEM Guru

Note: Clickable employees volunteer several hours a week to helping other search marketers succeed. "Clickable Gurus" participate in numerous online search communities to provide straightforward answers to numerous questions, and, each week, one of the gurus posts a search marketing tip to the Clickable Blog.