Google Ads is based on a second-price auction system to determine which ads appear and in what order when someone searches on Google. In a second-price auction, the winner of the auction pays the second-highest bid plus one cent.
There are also other factors that Google Ads considers in the ad auction, e.g., the quality of your ads, the time of day, etc. To run successful Google Ads campaigns, you need to also know what bidding strategies to incorporate. For Search Engine marketers, this can often be the most difficult choice and most complex undertaking. This blog will dive into the web of bidding strategies and attempt to alleviate any confusion.
Google Ads bidding strategies are a set of rules that determine how much you’re willing to pay for each click on your ad. The right bidding strategy can help you get more clicks, conversions, and value for your advertising budget. There are different bidding strategies available, each with its own advantages and disadvantages. The best bidding strategy for you will of course depend on your specific goals and budget.
Manual CPC bidding is the most basic bidding strategy. You set a maximum CPC bid for each keyword or ad group, and Google Ads will never pay more than that amount for a click. This gives you the most control over your bidding, but it can also be more time-consuming to manage. 100% Manual CPC is not common these days. If you apply manual bidding, eCPC (enhanced CPC) is more common. With eCPC bidding, Google Ads will automatically adjust your bids based on a variety of factors, including the likelihood of a conversion, the competition for the keyword, and your budget. This means that you can potentially get more conversions for the same amount of money, or the same number of conversions for less money. One note of caution, eCPC biddings can become a runaway train with absurdly high CPCs so constant monitoring is necessary.
Smart bidding strategies like Target CPA (Cost Per Acquisition) and Target ROAS (Return On Ad Spend) require data for proper application thus I will get to them later. First, let us look at Maximize Clicks bidding. Maximize clicks bidding is an automated bidding strategy that sets your bids to help get as many clicks as possible within your budget. It is the simplest way to bid for clicks—you set a budget, and Google Ads does the rest. You don’t need to choose specific bid amounts for your ad groups, keywords, or placements.
With maximize clicks bidding, Google Ads will automatically adjust your bids up or down based on the competition for keywords, the likelihood of a click converting, and your budget. This means that you can potentially get more clicks for the same amount of money, or the same number of clicks for less money.
This bidding strategy is best practice for the initial ramp-up period. Google’s (or Bing’s) machine learning does not know anything about your account. It’s a tabula rasa, a clean slate. It’s paramount to maximize your clicks’ intent with thorough keyword research and highly relevant unbranded keywords to get in front of hand raisers. This will drive initial optimized traffic to your website for newly launched campaigns.
Moreover, you can set bid limits using the Maximize Clicks bid strategy. It is recommended to let Maximize Clicks run for at least 30 days to acquire enough data before making any changes.
Target impression share bidding is an automated bidding strategy in Google Ads that sets bids with the goal of showing your ad on the search results page for a certain percentage of impressions. This means that you can control how often your ad is shown for your target keywords, regardless of how competitive they are.
For example, if you set your target impression share to 70%, Google Ads will try to show your ad for 70% of the impressions available for your target keywords. If there are only 100 impressions available, Google Ads will try to show your ad 70 times. Target impression share bidding is a good option for businesses that want to control the frequency with which their ads are shown. It can be especially useful for businesses that are bidding on competitive keywords.
Here are some of the benefits of using target impression share bidding:
- Control over ad frequency. Target impression share bidding gives you control over how often your ad is shown. This can be helpful if you want to avoid showing your ad too often, which can lead to ad fatigue.
- Improved ad visibility. Target impression share bidding can help your ad get more visibility in search results. This can lead to more clicks and conversions.
- Better budget management. Target impression share bidding can help you manage your budget more effectively. You can set a target impression share and Google Ads will automatically adjust your bids to try and achieve that goal.
The Target Impression Share bidding strategy also lets you target where on the SERP (Search Engine Results Page) you want your ads to appear:
- Anywhere on the SERP
- Top of the results page. For example, the first ad above the organic ranking
- Absolute top of the results page
This can be a good bidding strategy to have a counter-offensive against aggressive competitors. However, Target Impression Share is not recommended for brands with small budgets. CPCs can get expensive quickly to be able to beat the tough competition for achieving high ranking. I would not recommend it for any Unbranded campaigns, but it might be a good option for Branded campaigns to defend Branded terms against aggressive competitive encroachment to improve Branded ads’ visibility.
After the initial ramp-up period, we can begin to look at lower-funnel smart bidding strategies. However, conversion actions need to be set in the engine, and conversion tracking needs to be completed on the landing pages for proper optimizations. Further, Google Analytics 4 needs to be linked with Google Ads for data flow. The first we’ll look at is the Maximize Conversions bidding strategy. Maximize conversions bidding is a Smart Bidding strategy that automatically sets bids to help you get as many conversions as possible within your budget. It uses machine learning to analyze your historical conversion data and the context of each auction to determine the optimal bid for your ad.
Here are some of the benefits of using Maximize Conversions bidding:
- It can help you get more conversions. By automatically setting bids, Maximize Conversions bidding can help you get more conversions within your budget.
- It can help you save money. Maximize Conversions bidding can help you save money by bidding more strategically and avoiding overspending.
- It’s easy to use. Maximize conversions bidding is a set-and-forget bidding strategy that doesn’t require you to constantly monitor your bids.
However, there are also some drawbacks to using Maximize conversions bidding:
- It can lead to higher CPAs. Maximize conversions bidding may bid higher than you would if you were setting your bids manually, which can lead to higher CPAs. Speaking from experience, some CPAs can truly be off the charts. Especially towards the end of the month, costs can get away with the Maximize Conversions bidding strategy since the Google algorithm is chasing conversions if the campaign was underpacing.
- It may not be suitable for all businesses. Maximize conversions bidding is best suited for businesses that have a high volume of conversions and a large budget. If you have a low volume of conversions or a small budget, you may be better off using a different bidding strategy.
Overall, Maximize Conversions bidding is a great option for businesses that want to get more conversions within their budget. It’s easy to use and can help you save money, but it’s important to be aware of the potential drawbacks before you use it.
Here are some tips for using Maximize conversions bidding effectively:
- Set a realistic budget. Maximize conversions bidding will try to get as many conversions as possible within your budget, so it’s important to set a budget that you’re comfortable with.
- Monitor your results. It’s important to monitor your results with Maximize conversions bidding to make sure that you’re getting the results you want. If you’re not happy with your results, you can always switch to a different bidding strategy.
- Use other bidding strategies in combination with Maximize conversions bidding. You can use Maximize conversions bidding in combination with other bidding strategies, such as Target CPA or Target ROAS. This can help you get the best results possible.
As mentioned earlier, let us look at the tCPA and tROAS bidding strategies as the difference between them is sometimes not fully understood. First, to be able to implement any of those bidding strategies, your account needs historic conversion data.
Target CPA aims to get you as many conversions as possible while keeping your cost per acquisition (CPA) below a target that you set. Obviously, your tCPA needs to be below the AOV (Average Order Value) to have a profit margin or the bidding strategy will not make sense. Google Ads uses your historical conversion data to determine the optimal bid for each auction. Ads will show more often in auctions where it’s likely to convert, and less often in auctions where it’s less likely to convert. This can help you get more conversions from your Google Ads campaigns since the algorithm focuses on showing ads to users that are more likely to convert but not necessarily the cheapest click.
The tCPA bidding strategy can benefit businesses that have a budget constraint, longer sales cycles, and lead gen brands that are looking to generate higher-quality leads at a specific cost. Some disadvantages of a tCPA bidding strategy are:
- Can be slow to learn: Target CPA bidding is a learning algorithm, which means it takes time for Google Ads to optimize your bids and get you the results you want. In the preliminary stages of using this strategy, you may see some fluctuations in your CPA and conversion volume. Don’t adjust too quickly and too often. Google’s machine learning needs time to learn the account and if the needle is moved up and down constantly, it will confuse the algorithm and hinder performance.
- Can be less effective for competitive keywords: Target CPA bidding is best suited for keywords with a moderate level of competition. If you are bidding on highly competitive keywords, you may find that your CPA is higher than you would like.
- Gives up some control: With Target CPA bidding, you are giving up some control over your bids. Google Ads will automatically adjust your bids in real-time to try to achieve your target CPA. This can be a good thing if you are not comfortable with manual bidding, but it can also be frustrating if you want to have more control over your campaign.
Target ROAS (Return On Ad Spend) helps you achieve your desired return on ad spend (ROAS). Google Ads will automatically adjust your bids for each auction to help you get as close to your target ROAS as possible. For example, if you set a tROAS at 300%, it means you are aiming at earning $3 for every $1 you spend on advertising costs. The absolute must for implementing this bidding strategy is that your website needs to record revenue on the backend, i.e., the actual conversion value of a sale needs to be recorded. This bidding strategy will not work with lead accounts. The tROAS bidding strategy is often the choice for eCommerce accounts and works better if the campaigns are mature, well-optimized, and revenue based.
Target ROAS bidding can be expensive, especially if you have a high target ROAS. This is because the algorithm will bid more aggressively to achieve your goal. If you’re on a tight budget, tROAS bidding may not be the best option for you. Don’t overshoot with your tROAS. If your historical data shows an actual ROAS of 200% it wouldn’t make strategic sense to set your tROAS at 900%. In this case, your ads’ impressions would be quite limited. It’s best practice to set your tROAS slightly above your actual ROAS for scalability. Moreover, changing the tROAS up and down constantly will confuse the algorithm and hurt performance. Wait at least one week before adjusting the tROAS again and only approximately by 20% up or down.
There’s often confusion with the various bidding strategies especially when to use tCPA or tROAS. As mentioned, tCPA might be a better option for lead gen and for campaigns that need conversion volume to drive revenue, e.g., insurance companies. For eCommerce brands, a tROAS bidding strategy might be a better choice. You need adequate data for either bidding strategy to work well. Moreover, if you have a specific CPA or ROAS goal, you need to pace your account with a tiered approach, jumping from A to Z in one big step will only impede your campaigns’ performances. This is a common mistake I have seen in the Paid Search world.
There’s no set-in-stone blueprint for bidding strategies. It takes experience and trial and error to understand the various nuances. However, best practices need to be applied and to have solid, historical data are vital for tCPA and tROAS to function properly. In conclusion, you can only apply the lower-funnel bidding strategies if conversion tracking/tagging is set up correctly. If not, you can only use manual CPC and Maximize Clicks bidding strategies in that case, which focus on front-end metrics.
Overwhelmed by all the bidding strategy options on Google? Don’t fear- our team of experts is here to help. Schedule a time to talk with them today for your FREE strategy consultation to make sure your campaigns are set up properly and running to their full potential.