Understanding Bid Strategies in Google Ads

Since Google ads is an auction-based system, advertisers need to place bids to get exposure for their ads. Therefore, bidding is one of the most important aspects of the entire process. While bidding used to be simpler and more straightforward, modern technology has allowed bidding to become more complex and sophisticated. These days, there are a number of different bidding options, several of which incorporate machine learning, which can sometimes be an advantage.

An important note is that your bid is not the same as what you’ll be charged. For example, you could bid $5 per click on a keyword in a search campaign but only pay $2.20. It all depends on what the competitors in the auction are bidding. You’ll only end up paying what’s minimally required to beat the Ad Rank of the competitor immediately below you.

What are you bidding on?

In earlier days of Google advertising, you would simply bid for how much you were willing to pay for a click on your ad. Or, in the case of display ads, you could optionally bid per 1,000 impressions of the ad (a.k.a., CPM bidding). Then came a new level of sophistication when Google basically said, “How about you tell us how much you’d like to pay for a conversion, and we’ll set the bids for you on an auction-by-auction basis?” This is called CPA (cost-per-acquisition) bidding. Since then, Google has implemented other variations of this feature, now known as Smart Bidding.

Smart Bidding options

Smart bidding options involve Google using its machine learning to decide bids (or adjust bids) for you on an auction-by-auction basis. It leverages the vast troves of data Google collects to find patterns, which can then predict an increased or decreased likelihood of a conversion.

There are five Smart Bidding options you can use. Here’s a description of each:

Target CPA (cost-per-acquisition) – You input how much you’d like to pay for a conversion. The system will then take control over your bidding for each auction in an attempt to achieve conversions at your desired cost.

Target ROAS (return-on-ad-spend) – If you sell products for $2, but you also sell products for $350, you wouldn’t want Google Ads to consider all conversions to be equal. Target ROAS lets you optimize for conversion value so that you can not only achieve conversions but also get an appropriate return on ad spend for products of varying costs.

Maximize Conversions – This strategy is similar to target CPA, but instead of targeting a specific CPA, the system will spend your entire budget in an attempt to get you the most conversions possible.

Maximize Conversion Value – This strategy allows you to optimize for conversion value like Target ROAS, except it focuses on spending your entire budget instead of targeting a specific ROAS.

Enhanced Cost-Per-Click (ECPC) – This is a setting that can be turned on if you are using manual bidding. It allows the system to increase or decrease your bids a limited amount if there’s an indication that a conversion is more likely or less likely.

CPC (cost-per-click) bidding options

While Smart Bidding options are focused on achieving conversions, CPC bidding options are only focused on getting clicks. Here are the two CPC bidding options that are available:

Manual CPC bidding – You have full control over your bids. You can set a default bid for each ad group, or you can set a customized bid for each individual keyword.

Maximize Clicks – This is an automated bid strategy that tells the system to get you the most clicks possible for your daily budget.

Visibility bidding options

Bid strategies focused on visibility are for when you want your ads to be seen but are less concerned about what action the viewer of the ad will take. Here are the bid strategies for focusing on visibility:

Target Impression Share – This strategy only applies to search ad campaigns. It allows Google to automate your bidding for the goal of receiving a specified level and amount of ad visibility on search results pages. The three options for specified visibility are: The absolute top of the page, the top of the page, or anywhere on the page of Google search results. Keep in mind that there are only a limited number of searches on any given topic per day on Google. The metric of impression share relates to the percentage of those searches in which your ad is visible. For example, you could choose an Impression Share target of 75% on the absolute top of the page. The system will then set your bids automatically to achieve this goal.

CPM – CPM means “cost-per-1,000-impressions”. With this strategy, you’ll bid the maximum you’re willing to pay for every 1,000 impressions received on the Google Display Network or YouTube.

tCPM – This strategy is available for some video campaigns. It allows you to tell the system your desired cost per 1,000 impressions of your video ad. It optimizes for unique reach, meaning it attempts to show the ad to as many unique individuals as possible.

vCPM – This strategy is similar to CPM, except it only counts viewable impressions. (With CPM bidding, ads can get impressions without actually being seen on a screen, such as when someone doesn’t scroll down far enough.)

Views or interactions bidding

With some video ad campaigns, you can choose CPV (cost-per-view) bidding that focuses on views or interactions. For example, someone watching at least 30 seconds of a video (which is considered a view) or someone clicking on the URL link of a video ad (considered an interaction). For this strategy, you’ll enter the highest price you are willing to pay for a view or interaction. (Views and interactions are considered equal in terms of the bid and cost involved.)

Which bidding strategy should you choose?

The bid strategy you choose should be aligned with your advertising goals. Keep in mind that not all strategies are available for all campaign types. One thing you might want to do is test different strategies to see if the results improve. For example, if you have a campaign that uses the Maximize Clicks strategy, you could create a copy of that campaign and change the bidding strategy to Target CPA to see if it brings in better results. (It would be possible to have both campaigns running at the same time. Google would only show one of your ads in any given auction – the one with the higher ad rank.)

Google suggests that you consider these four possible goals when deciding on the bidding strategy for your campaign:

• If you want visitors to take a direct action on your website and you have conversion tracking set up, consider using one of the Smart Bidding options.
• If you want to get traffic to your website, perhaps choose CPC bidding.
• If you want to focus on branding goals, perhaps choose vCPM bidding, which prioritizes impressions.
• If you want to increase views or interactions with video ads, perhaps choose CPV or CPM bidding.

In closing

Bidding is an area of Google Ads that becomes more sophisticated and complicated over time. I hope this overview helped improve your understanding of the various options and why you might use them.

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