One of the most common questions asked about online marketing is how to ensure you are optimizing your campaigns and seeing the best results with the budget you invest. An increasing number of tools and marketing platforms are using machine learning to try and simplify these optimization processes – at the forefront of which is Google. Google makes use of machine learning for its smart bidding strategies in Google Ads. This blog post explains what exactly Google Ads smart bidding is.
What Is Google Ads Smart Bidding?
Smart bidding is a subset of automated bidding strategies in Google Ads. With the help of machine learning, the different bidding strategies optimize for conversions or conversion value. With smart bidding, the algorithm uses the available campaign budget to achieve as many conversions as possible while ensuring campaign profitability.
Smart Bidding Strategies have two business goals attached to them: Either to increase leads or sales OR to increase profit. These two business goals dictate different campaigns goals. Suppose the goal is to increase sales or leads. In that case, the campaign goal is to get the maximum amount of conversions with a fixed budget or a defined ROI (Return on Investment). Suppose the business goal is to increase profit. In that case, ideally, the campaign goal is to get the maximum amount of conversions with a fixed budget or a defined ROAS (Return on Ad Spend). In consequence, Google recommends different Smart Bidding Strategies for the various business goals.
Goal: Increase Sales or Leads
If your goal is to increase sales or leads, then Google Ads recommend the following two Smart Bidding Strategies:
- Maximize conversions: With this strategy, the algorithm behind Google Ads sets the bids automatically to achieve the highest number of conversions with the available budget.
- Target CPA (Cost per Acquisition): This bidding strategy aims to get as many conversions as possible at a set target CPA. The target CPA is the average amount you are willing to pay for one conversion.
Goal: Increase Profit
If your goal is to increase profit, then Google Ads recommend the following two Smart Bidding Strategies:
- Target ROAS bidding (Return on Advertising Spend): This Google Ads Smart Bidding Strategy is based on a targeted ROAS. The target ROAS is the average conversion value you will get for every Swiss Franc or Euro you spend on advertising.
- Maximize conversion value: The Smart Bidding Strategy Maximize conversion value can be used with a Target CPA or a Target ROAS, whichever suits your business KPIs best. Suppose you chose to set a Target CPA. In that case, the Google Ads algorithm will focus on spending the defined budget to maximize the conversion value of your campaign within the defined CPA. If your focus is a Target ROAS, the algorithm will maximize your conversion value while staying within the defined ROAS.
What Are the Advantages of Smart Bidding?
In addition to the most apparent advantage of using automated bidding strategies, namely the time saved, there are two other advantages:
- Advanced machine learning: With the advanced machine learning algorithms Google Ads implements, bids are adapted for every single auction an ad enters. With Smart Bidding Strategies, the focus is on how varying bid amounts impact the number of conversions generated or the conversion value generated.
- Integration of contextual user-signals: The number of different parameters taken into consideration and the algorithm’s complexity exceeds the possibilities of any one person, and the algorithm can react much faster to changes in user behavior than any human could. Some of the signals used by the algorithms in Smart Bidding Strategies are weekday, time of day, devices, physical location, location intent, remarketing lists, ad characteristics, browser usage and operating system, interface language, and actual search query.
When Should Smart Bidding Strategies Be Used?
All these bidding strategies optimize for conversions. Therefore, we recommend using smart bidding only if you have a minimum of thirty conversions per month in your account (fifty per month for Target ROAS). Thus, smart bidding is mainly suitable for companies with e-commerce or a substantial amount of monthly lead generation.
Smart bidding strategies have a lot of advantages and make your daily work easier. However, even if you use smart bidding strategies, regularly review and optimize your campaign performance, including the bidding strategies implemented. Ultimately, you know what your campaigns should be optimizing towards best. If you find your Smart Bidding Strategy is not working the way you expected, try a different strategy that is better suited for your business goals. Or, if you need support, reach out to us to analyze your issue and support you with finding a better solution for your campaigns!
