11/05/2023

Smart bidding strategies in Google Ads and when to use them

What is smart bidding?

Smart Bidding is a set of strategies you can deploy with automated bidding in Google Ads. They differ from other forms of automated bidding in that you are leveraging Google’s machine learning technology to optimize your bids for each auction every time an auction happens. This is what Google Ads calls “auction-time bidding.”

In a nutshell, it’s a way of applying all the power of Google AI (drawing from a wide range of contextual signals) to the most granular level of your PPC campaigns.

Smart bidding works with data, so when considering moving to a smart bidding strategy, you need to confirm that your traffic volume is enough for it to work correctly.

What are the different smart bidding strategies and how do they work?

Smart bidding can help you achieve two main business goals: increase sales or leads, or increase profitability (leads or sales at a lower cost).

These two outcomes can be reached by deploying four different Smart Bidding strategies:

Target CPA → increase sales/leads
Maximize conversions → increase sales/leads
Target ROAS → increase profitability
Maximize conversion value → increase profitability

We’ll also talk about two automated bidding methods that are not part of Smart Bidding strategies, but it’s useful to know them and their differences with smart bidding.

Let’s review each of these bidding strategies:

1. Target CPA

Target CPA (or cost-per-action) bidding is a Smart Bidding strategy that will maximize conversions for your campaign. When you use Target CPA, you set an average cost that you are comfortable paying for each conversion obtained in your campaign.

When a customer does a Google search that matches your targeted keywords, Google uses your target CPA to calculate how much it should bid, based on the likelihood of that particular search leading to a conversion. This is where the “wide variety of contextual signals” are used by Google’s algorithms.

Say you analyze your past marketing performance and discover that you’ve been getting conversion at an average cost of $30. You can then set up a Google Ads campaign with a Target CPA of $25, knowing that conversion obtained this way will have a lower cost than your average so far.

Target CPA is the appropriate Smart Bidding strategy if your conversion goal doesn’t have a conversion value and you are very clear on how much is your CPA limit or if we are talking about lead generation.

2. Maximize conversions

The Maximize conversions method sets bids to get the most conversions for your campaign inside your allocated budget for the campaign. The difference with Target CPA is you are not defining an average cost per conversion, but rather you say to Google’s algorithms: get me as many conversions as you can with this budget.

This is useful for a campaign with a set budget and in cases where all your conversions have similar values or there is no way to assign different values to them (for example, acquiring leads).

3. Target ROAS

Target ROAS works just like Target CPA, except that it also calculates the value that a particular search will bring in case it leads to a conversion. Basically, if it estimates that a search has good potential to end in a high-value conversion, it will perform a high bid for that click. If the AI believes that it won’t generate a high-value conversion, the bid will be low.

For Target ROAS to work, you’ll need to set values for the conversions you’re tracking. Target ROAS is available as a standard bidding strategy for single campaigns and as a portfolio strategy.

Now, imagine you manage an e-commerce store, where each purchase in the past had an average marketing cost for you of $30, whereas the average order had a value of $60. By using Target ROAS, you could aim at increasing the price of the average cart or order for your e-commerce – you’re not interested in spending marketing dollars for low-value conversion, only high-value ones. But if you aim for a value that’s too high, it’s possible that you’re not able to spend all your budget for the campaign.

4. Maximize conversion value

In a similar way to how Maximize conversions work, here you tell AI to get you the highest possible conversion value, using the budget you have available for the campaign. Maximize conversion value will always try to use your complete budget.

Same as with Target ROAS, before you can use Maximize conversion value bidding, you will need to set up conversion tracking in your website, with transaction-specific values turned on.

The use case is also quite similar to Target ROAS (trying to increase average order value for an e-commerce site), but the difference is here you will always use all available budget.

5. Maximize clicks

Maximize clicks is an automated bidding strategy, but not a Smart Bidding strategy. Simply put, use it when you’re trying to get as many clicks as possible within your budget. It allows you to forget about manually managing CPCs. A word of warning, though: with this method, Google Ads could use your total daily budget rather quickly since its main priority is getting clicks.

6. Enhanced CPC

Also not a Smart Bidding strategy, Enhanced CPC is a way to give you more flexibility than standard manual CPC by helping you get more conversions from manual bidding.

ECPC works by automatically adjusting your manual bid, bidding higher on searches clicks that Google considers more likely to lead to a sale or conversion on your website. Unlike Target CPA and Target ROAS Smart Bidding, which automatically set bids based on targets set by you (whether cost per conversion or return-on-ad-spend), ECPC will try to keep your average CPC always below the max CPC you set (including bid adjustments). So this way, you can avoid surprises with really high CPCs for individual bids.

Conclusion

What you’re trying to achieve with your campaigns (more sales? sales at a cheaper cost?) should determine what bidding strategy is best for you. Smart strategies leverage AI to help you avoid micromanaging bids and focus on strategy and performance, just as OrbitalAds, powered by AI, helps you get the most out of your campaigns by avoiding micromanagement of keywords and campaign structure. Try OrbitalAds and Smart strategies together; it’s a winning duo!