In our experience, we've tried the super-targeted approach.

What we found, even 3-4 years ago is that it became alot harder to do bid optimization when it was to segmented.

Even in super-competitive verticals (e.g. mortgage/finance leads, florists etc.), where there's reason to break things down to the long tail, it's made alot more sense to use Google's keyword tool to remove the keywords that have no volume.

Keep in mind, that in the past 6 months, exact match is becoming obsolete, as Google automatically includes related keywords.

So don't obssess as much on the "long tail keywords", and focus more on your ad copy messaging, positioning (what percentage of the time you are on top), and landing page conversion rate, and this will give you a much higher conversion rate.

- David