Smart Bidding is a subset of automated bidding strategies within Google Ads that optimise your ads based on the goals you set, using thousands of real time bidding signals.
When using Smart Bidding, all existing bid modifiers are ignored except for 100% negative bid adjustments (device exclusions, audience exclusions etc). Essentially, Google is trying to accomplish the mission that you’ve set for it.
To encourage more extensive – and effective – use of Google Ads, Google has been continually adding Smart Bidding options for ad management to automate functions, reduce complexity and (ideally) improve ROI.
There are four main Smart Bidding strategies within Google Ads designed to maximise conversions, and one designed to maximise traffic. Whether you’re an experienced PPC strategist managing large accounts or a marketer totally new to Google Ads, it’s important to understand how these five core strategies are best used – and what to watch out for.
In this article, I’ll take a close look at each one, explain how it can be applied, and highlight the benefits as well as the potential pitfalls.
Why use Smart Bidding?
With the customer journey becoming more complex than ever, the complexity of bidding is on the rise too. This is particularly the case in fast-moving sectors where a myriad of different customer audiences search in different ways about a rapidly changing inventory of products.
It is becoming more and more challenging to keep on top of campaign optimisations without sacrificing attention on some products and offers.
According to Google, as of 2019 about 80% of digital marketers’ time is spent on manual tasks like bidding, while only 20% is spent on strategy.
Smart Bidding allows (in principle) for more intelligent working by automating routine tasks. With Smart Bidding, PPC managers and marketers can also eliminate (if they choose) the need to optimise each campaign for audience, device, demographic, location etc – and the list goes on!
Particularly for time-poor in-house PPC marketers, you are left with so much more time to dedicate to strategic activities.
Secret Escapes: How machine learning reduced cost per lead by 38% [case study]
Five Smart Bidding strategies
There are five strategies you can establish in Smart Bidding that Google uses to reach the outcomes that you’ve specified:
1. Enhanced Cost Per Click (ECPC)
GOAL: Although Enhanced CPC uses machine learning, it is only a semi-automated strategy and is a hybrid of Smart and manual bidding. It works by automatically adjusting bids for clicks that are likely to land you conversions.
Example: For a US based travel company, users in California are most likely to purchase a holiday to Cuba, and users in North Carolina are least likely.
ECPC would automatically upweight manual bids for users in California to match the increased conversion likelihood for this location, and downweights bids for South Carolina searches.
CONDITION: Unlike Target CPA (described below) ECPC is constrained by a Max CPC bid that you set and will aim to keep your average CPC below this value.
This will prevent click cost from rising too high, while focusing bids to achieve conversions at the best click cost.
BENEFIT: This strategy is a good way to try Smart Bidding for those that are somewhat hesitant. It demonstrates what’s possible, whilst maintaining close control of spend.
WARNING: If you don’t set a Max CPC cap, your average CPC can creep significantly higher than what is profitable– so it’s important to set this threshold.
This is particularly important in highly competitive sectors where there might be lots of search volume, with a lot of other companies bidding on the same terms.
2. Target Cost Per Acquisition
Unlike Enhanced CPC, this bidding strategy is fully automated, as are all the strategies detailed below – so experiment with caution!
GOAL: Target CPA Smart Bidding works by aiming to get as many conversions as possible whilst staying within the target CPA.
On average, the CPA for Display campaigns will be closer to the target than for Search campaigns, as Google can apply acquisition data more rapidly to the campaign.
CONDITION: Google recommends that advertisers have at least 30 conversions in the past 30 days before using Target CPA.
This provides enough data to inform the bidding strategy, and the longer the campaign runs, the more data can be drawn on to hit your acquisition targets.
BENEFIT: Google has identified a typical 31% uplift in conversions by using Target CPA Smart Bidding. It is particularly suited to eCommerce businesses where manual optimisation over a wide range of products isn’t practical.
With Target CPA bidding, if you know your margins, there is plenty of scope to maximise your bidding to adjust based on competition, without abandoning profit.
WARNING: the cost-per-conversion (CPC) will sometimes go above the Target CPA that you’ve set, particularly at the start, so that has to be budgeted in.
Target CPA may not work effectively if your campaign is budget-restrained as it aims to meet the set CPA over the course of the whole day- so if the budget runs out at midday your average CPA may be high.
This can be managed by being conservative with the CPA figure you set and building up campaigns so that Google has more data to optimise accurately.
3. Maximise Conversions
GOAL: Maximise Conversions aims to get as many conversions as possible at the lowest possible CPA, without exceeding your daily budget.
This approach differs from Target CPA as the primary goal is number of conversions, with the CPA as a secondary consideration.
Example: This approach is best used by acquisition-focused businesses, who can anticipate a longer-term customer value as they build market share – eCommerce retailers who make a good margin and can anticipate repeat purchases can do well here.
CONDITION: This bidding strategy will aim to spend as much of your daily budget as possible, so make sure you can afford to spend the amount that your daily spend cap is set at. Campaigns should not be using a shared budget as this will be a drain on other campaigns.
Essentially, setting the task Google’s Smart bidding to Maximise Conversions is telling the system to get aggressive to get more sales, as rapidly as possible within your budget – the gloves are off!
BENEFIT: If your focus is on conversions and you’re happy not to carry-over budget to the next day, this approach is one to adopt.
WARNING: This strategy isn’t for campaigns with a strict CPA or Return On Ad Spend goal as the system will prioritise number of conversions – rather than the profitability of those conversions – across the day.
Example: this strategy would be particularly useful for industries that experience peak trading periods, for example fashion e-commerce sites around Black Friday where conversion rate is extremely high and there is intense competition.
4. Maximise Clicks
GOAL: Choosing Maximise Clicks will aim to get as many clicks as possible within your budget.
CONDITION: Be prepared to regularly check your average max CPC as Google will aim to spend the entire daily budget, even if clicks are more expensive than normal. Choosing a focus on clicks (rather than conversions) means that Google will be focusing just on this area of the customer journey to drive traffic.
BENEFIT: This is a great option for those wanting to drive more traffic to their site when conversions are already strong.
This strategy would work well alongside other timely marketing campaigns such as TV advertisements or billboard campaigns – if you have the budget to spend.
Example: Nivea may want to use Maximise Clicks for their Display campaign targeting users searching for sun cream during July when they are also running a TV campaign about the dangers of skin cancer.
If you know your site is effective at converting different types of audience, choosing to Maximise Clicks can make sense as the system will deliver the traffic needed.
WARNING: If a maximum bid limit is not set, your CPC bid will be adjusted to gain as many clicks as possible – certainly not recommended unless you’ve got budget to blow!
Setting a maximum threshold will save budget but will also potentially limit the amount of traffic this method delivers – balance is needed.
5. Target Return on Ad Spend (ROAS)
GOAL: to increase conversions without exceeding your ROAS target. ROAS is calculated by working out the revenue generated from the total amount spent on advertising. In short, revenue/cost = ROAS.
The more revenue generated per $/£ spent on ad spend the better, of course.
CONDITION: For Google to effectively apply ROAS data, your campaign must have at least 15 conversions in the past 30 days.
Before you can apply Target ROAS to campaigns you’ll need to set values for the conversions that you’re tracking – if Google doesn’t know the revenue generated from your conversions, it can’t calculate ROAS.
BENEFIT: Google claims that advertisers see an average uplift of 35% in conversions when using Target ROAS on Display Ads – the biggest uplift of all Smart Bidding strategies.
Additionally, it is also the only strategy that factors in the predicted conversion value of a user when deciding how much to bid – and calculating bids based on financial value is arguably the most meaningful way to optimise.
Example: To show how this might work across a diverse range of products, if you’re a retailer of bedroom furnishings and products and your business sells both mattresses and pillows, Target ROAS will likely bid up more for search terms including ‘mattress’ than those including ‘pillow’.
This is because the return on mattresses is likely greater, bearing in mind the total purchase cost and margins.
If your focus is on total return rather than promoting specific products, Target ROAS can ensure you have a disciplined focus on your money-making products.
Shopping campaigns work well using Target ROAS as product prices can be accessed through Google Merchant Center – helping to join up data and complementary channels.
WARNING: Don’t set your Target ROAS at an unrealistically high level that will limit activity. It’s best to begin with a goal that is lower than your historical performance and gradually raise the Target ROAS over time.
As ever, Smart Bidding with Target ROAS is about balance – and a mixture of quantity and value is needed to generate consistent revenue.
What Target ROAS can do is make sure that the process of testing this out is automated, making it much easier to find that sweet spot where the volume of sales is balanced with the strongest practical return on spend.