AdWords Smart Bidding: Dos and Don’ts

“Smart Bidding” is the umbrella term in AdWords for automated bid strategies. Smart bids can vary — from targeting page placement to outranking a competitor. Advertisers can access these features by navigating to campaign settings and view “Bidding.”

Navigate to campaign settings and view Bidding.

Navigate to campaign settings and view “Bidding.”

Smart Bidding uses AdWords’ extensive data to help achieve the stated goal. The data is compelling. Google knows, for example, a user’s search history, the videos he has viewed on YouTube, how long he has spent on certain sites (via Google Analytics), his tendency to click ads, and the apps on his smartphone (for Android users).

There are seven Smart Bidding options. In this post, I’ll address each one.

Smart Bidding offers seven options.

Smart Bidding offers seven options.

Smart Bidding: 7 Options

Enhanced CPC is the default bidding option for new campaigns. This bidding strategy is a simple on or off with no granular control. It uses a limited set of signals, “such as demographics, browser, location, and time of day,” to adjust manual cost-per-click bids up or down depending on the likelihood of that click converting.

Enhanced CPC — eCPC — previously limited bid increases to 30 percent. In May 2017 this limit was abolished. However, AdWords states that “eCPC will still respect your manual bid by trying to keep your average CPC below your max CPC over time.”

I typically disable this feature when creating new accounts because I prefer the control of manual bids. But the option is worthwhile for advertisers that don’t have a lot of time to spend on bidding and have low conversion volume.

Target CPA. Cost per acquisition is calculated by dividing the ad cost by the number of conversions. It’s synonymous with cost per conversion. This bidding strategy allows AdWords to adjust your bid with the goal of delivering conversions at or below your Target CPA. It’s helpful for budget-limited campaigns looking for greater efficiency.

AdWords will recommend a target CPA. It’s tempting, however, to set a target CPA very low and let AdWords work its magic. But that would likely strangle the campaign.

I often start with the recommended target and see how AdWords performs. If the actual CPA is consistently lower than the target, I’ll slowly lower it. Remember, the more data AdWords has, the more intelligent its adjustments will be. Thus campaigns with low conversions will tend to have inconsistent results.

Target ROAS — return on ad spend— is essentially the same as Target CPA. But it goes one step further by factoring in conversion value. This bidding strategy can be more effective when purchase amounts vary widely, as AdWords can bid more for clicks that display signals indicating larger purchases. Target ROAS and Target CPA are my preferred Smart Bidding options because they’re directly tied to conversion metrics defined by the advertiser.

Maximize clicks. This bidding strategy delivers the most clicks for a given budget. But there are risks. If you have little budget, AdWords could favor low-cost clicks that are informational and therefore less likely to convert. For example, “how to install a water heater” could cost $10 per click, while “companies that install water heaters” could cost $25.

Also, if you have a high budget, but very few potential impressions, AdWords may aggressively increase bids to obtain clicks, leading to excessive click costs. As such, I typically do not recommend this option for any advertiser.

Maximize conversions. This is similar to “Maximize clicks” but seeks as many conversions as possible for a certain budget. Low-cost conversions may be lower quality so you’ll have to monitor closely. I don’t recommend the “Maximize conversions” option. Use Target CPA instead.

Target search page location. This bidding strategy is for aggressive advertisers with many competitors. Once selected, you can choose “Top of the first results page” or “Anywhere on the first results page.”

I’ve often wondered what would happen if four advertisers selected “Top of the first results page” since only four spots are available. Click costs would likely skyrocket until budgets were depleted. I don’t recommend this option unless there is a reason for being so aggressive and you don’t have time to manage bids and positions to achieve the same result.

Target outranking share. This is the ultimate competitive bidding strategy. You can instruct AdWords to place your ads above a specific competitor. To do this, you provide the competitor’s URL with a percentage of time to appear above it. AdWords allows a maximum bid limit; there is some safeguard. But, in my experience, this option strokes advertisers’ egos, hurts their results, and makes Google more money. I do not recommend.

The Right Strategy

The key to pay-per-click advertising is to test, always. With Smart Bidding, you can easily test a new bid strategy with a campaign experiment. This allows you to split your budget between an existing campaign and a test version. To get started, navigate to “Drafts Experiments” in the left column.

To test, navigate to Drafts amp; Experiments.

To test, navigate to “Drafts Experiments.”

Create a draft, set it to utilize a different Smart Bidding strategy, and then enable it to run. AdWords will split the budget and report on the results.

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