Smart bidding is a transformative advertising strategy that has revolutionised the way advertisers can optimise their Google Ads campaigns.
It’s also something that Google has been pushing advertisers towards over the last few years.
According to Google, smart bidding is a “subset of automated bid strategies that use machine learning to optimise for conversions or conversion value in each and every auction – a feature known as ‘auction time bidding”.
Smart Bidding essentially leverages the power of advanced machine learning algorithms, enabling advertisers to automate and optimise their bidding strategies, allowing for more efficient allocation of resources and improved return on investment (ROI).
By analysing vast amounts of data and considering various factors such as device, location, time of day, and user behaviour, smart bidding algorithms continuously adjust bids in real-time to deliver the most relevant and effective ad placements.
There have certainly been improvements when it comes to automation and bidding over the last few years, but it can still be difficult for advertisers to know whether they should be utilising smart bidding strategies or sticking to a manual approach.
In this post, we’ll take a look at the pros and cons of using automated bidding strategies for your PPC campaigns, as well as the pros and cons for each of the smart bidding strategies, including; Target CPA, Target ROAS, Maximise Conversions, Maximise Conversion Value, and Enhanced CPC (ECPC).
So, let’s start with an overview of the pros and cons of using smart bidding:
Overview: Pros of Smart Bidding:
There are numerous advantages to using smart bidding in your Google Ad campaigns. From optimising bidding strategies to maximising ROI, smart bidding offers advertisers a range of benefits that have revolutionised their approach to digital marketing.
So, let’s explore some of the key advantages of incorporating smart bidding into advertising campaigns:
- Enhanced Performance: Smart bidding leverages advanced algorithms and vast data sets to make real-time bid adjustments. It aims to maximise conversions, conversion value, or achieve a specific target return on ad spend (ROAS). This can lead to improved campaign performance and efficiency.
- Time-Saving: By automating the bidding process, Smart bidding saves advertisers considerable time that would otherwise be spent manually adjusting bids. It can continually optimise bids based on various signals such as device, location, time of day, and user intent.
- Real-Time Adaptability: Smart bidding algorithms analyse a wide range of factors in real-time, such as search queries, user demographics, and device types, to adjust bids accordingly. This responsiveness allows campaigns to adapt quickly to changing market conditions and user behaviour.
- Enhanced Targeting: Smart bidding can factor in a plethora of signals to optimise bids, including user intent, location, device, and audience demographics. This level of granularity enables advertisers to target their desired audience more precisely and improve the overall campaign performance.
- Automated Performance Tracking: Smart bidding provides detailed performance insights and recommendations, allowing advertisers to gain valuable insights into bidding strategies and optimise their campaigns effectively. It simplifies the process of analysing and adjusting bids based on real-time performance data.
The Cons of Smart Bidding:
While smart bidding has undoubtedly transformed the advertising landscape, it is essential to understand that despite its benefits, smart bidding does come with certain limitations and challenges that advertisers should be aware of.
It is important to weigh these considerations carefully before fully embracing this automated bidding strategy.
So, lets delve into some of the potential cons of utilising smart bidding in online advertising campaigns:
- Lack of Full Control: Since Smart bidding relies on automated algorithms, advertisers may have limited control over individual bid adjustments. Some advertisers may prefer a hands-on approach and feel more comfortable manually setting bids to align with their specific business goals.
- Learning Period: Smart bidding algorithms require a learning period to understand campaign performance and make accurate bid adjustments. During this learning phase, campaign performance may fluctuate, and it can take some time for the algorithms to optimise bids effectively.
- Complex Campaign Structures: In some cases, Smart bidding might not work optimally with complex campaign structures or when multiple conversion goals exist. The algorithms may struggle to balance competing objectives, resulting in suboptimal bidding strategies.
- Limited Transparency: Smart bidding operates using complex machine learning algorithms, and the exact workings of these algorithms are not fully transparent to advertisers. This lack of transparency may make it challenging to understand why specific bid adjustments were made or to troubleshoot performance issues.
- External Factors: While Smart bidding can adapt bids based on real-time data, it may not always account for external factors such as seasonality, market trends, or competitor activities. Advertisers need to closely monitor these factors and make manual adjustments if necessary.
It’s important to note that the effectiveness of Smart bidding can vary depending on campaign objectives, industry, and other factors.
As such, it’s recommended to experiment with different bidding strategies and closely monitor performance to determine the most suitable approach for your specific needs.
The Smart bidding strategies available include:
- Enhanced CPC
- Maximise Conversions
- Maximise Conversion Value
- Target CPA
- Target ROAS
Now that we’ve got an overview of smart bidding, let’s take a look at the pros and cons of using each strategy:
Enhanced CPC
Enhanced CPC automatically adjusts your bids based on the likelihood that a keyword will convert while keeping within your max CPC restrictions. As such, it can be a good way to start with smart bidding as it’s relatively simple.
When Enhanced CPC is used, Google will either increase or decrease your bids in each auction based on whether they are likely to generate a sale/convert etc.
Good for:
Driving high volume site traffic at a low cost, whilst still optimising for conversions.
Caution:
Avoid using on brand-new campaigns. The system needs time to learn, so start with manual bidding and wait for a good data set before switching to enhanced CPC. You’ll also need to watch your spending as Google used to limit bid adjustments to 30% more or less but this was removed and as such can be much higher or lower.
Maximise Conversions
Maximise Conversions is a fully automated bidding strategy that automatically attempts to get the maximum amount of conversions within your set budget.
Good for:
Getting the most conversions from your budget, especially in campaigns that are limited by budget.
Caution:
While Maximise Conversions can be highly effective in driving conversions, it may not be suitable for all advertising goals or industries. It’s recommended to monitor its performance closely as you lack control and there is a risk of overspending if the algorithm’s bidding is too aggressive. It may not always prioritize factors such as cost per conversion or profitability.
It also cannot be used with campaigns with a shared budget, as each campaign will need a daily budget and only really works best when there is significant historical data. Ideally campaigns must have received over 15 conversions within last 30 days and have an impression share less than 90%. You also need to have conversion tracking in place.
Maximise Conversion Value
Maximise Conversion Value is very similar to maximise conversions, but is slightly more targeted. It attempts to generate the most conversion value for the budget that you set.
This value can represent the revenue generated by a conversion or any other predetermined metric that represents the importance of a specific conversion to the advertiser’s business.
So, rather than just getting the maximum amount of conversions for our budget, it’ll try to get the highest conversion value.
Good for:
Increasing your revenue as the algorithm optimises bids to prioritise high-value conversions.
Caution:
Using maximise conversion value can lead to higher costs per conversion as it prioritises bids based on those most likely to bring in the highest value. As such, you’ll need to monitor your ad spend closely.
To optimise bidding effectively, you’ll need to have sufficient historical data. For new campaigns, the performance will be limited until you have sufficient data.
Target CPA (tCPA)
Target CPA means target cost per action and optimises around an average CPA goal rather than getting all the conversions it can. It used to be a separate bidding strategy but is now available within maximise conversions.
When utilising the Target CPA bidding strategy, advertisers set a desired cost per acquisition or conversion that they are willing to pay. This cost represents the average amount they are willing to spend to acquire a customer or achieve a specific conversion goal. The platform’s algorithm then automatically adjusts bids in real-time to help advertisers reach the desired target CPA.
Good for: Target CPA bidding is particularly useful for advertisers who have specific cost targets or budget limitations. You’re able to scale campaigns at your current CPA goal while maintaining consistency. You are also able to manage costs better as you are setting a target cost per action.
Caution: Only apply to campaigns which have had at least 30 conversions in 30 days, and only set your target CPA to something that is realistic given the market conditions.
You’ll also need to set realistic CPA targets based on your past performance. For example, if set a target CPA much lower than your average CPA in the past, you’re unlikely to see results!
Target ROAS (tROAS)
Google Ads looks at each conversion separately and adjusts bids per auction to best hit your ROAS (return on ad spend) target. Target ROAS draws on moment-of-query-time information for precision bids.
Good for: Growing conversion value. tROAS can also achieve more consistent performances across different segments, like devices and locations.
Caution: Must have a minimum of 15 conversions over the past 30 days, and ideally 100+ conversions in the past 30 days for optimum performance.
Remember that with this setting all customers are treated equal. The smart bidding environment doesn’t differentiate between new vs. returning customers who may use Google Ads to convert. Acquisition costs can therefore shoot upwards as existing customers are targeted with equal value as new customers, and lifetime value calculations aren’t considered.
Smart shopping also behaves differently from standard inventory ads. Test shopping on a standard set up first, get your data set, recreate your campaign into a smart version and test ‘maximise conversions’. What you should look to find is a benchmark for your site’s performance with differences between placement. From here once a decent sample is taken, switch to tROAS.
Conclusion:
Smart bidding strategies in Google Ads offer a range of advantages and disadvantages for advertisers.
On the positive side, they provide automation and efficiency, saving valuable time and effort while maximising your campaigns’ performance. They offer flexibility, allowing advertisers to choose the most suitable strategy based on their goals and budget.
However, as we’ve discussed, smart bidding strategies are not without their drawbacks. They require a significant amount of historical data to work effectively, which can be a challenge for new campaigns or niche markets.
Advertisers also relinquish some control over bid adjustments, and it can mean that you need to monitor your spend a lot closer than you usually would.
Ultimately, the decision to employ smart bidding should be based on careful consideration of individual campaign goals, available data, and a willingness to embrace automation in advertising. By weighing the pros and cons, advertisers can make informed choices to achieve optimal results in their Google Ads campaigns.
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