Google Ads Bidding Strategy Explained (Manual or Automated?)

Keyword bidding strategy

Since 2018, Google has always encouraged us to use Smart Bidding’s strategy. Not only it is shown in Google’s public statement, our Google account manager repeatedly emphasized the benefits and importance of Smart Bidding to us in private. (Because you know product adoption is always one of their KPIs!!!)

Google claims that Smart Bidding is the future. It can enhance the effectiveness and Performance of Ads as it utilizes the most advanced technology to convert traffic easily and to use mechanical learning to find patterns for conversion. However, is Smart Bidding as good as Google claims? This article will try to look at the effectiveness of Smart Bidding in keyword bidding.

There are only two types of bidding strategies, one is Automated Bidding and the other is Manual Bidding. In Automated Bidding, Google automatically adjusts the bid for you according to certain conditions. And Manual Bidding is that you manually adjust the bid for each Ad group or keyword.

The following is the bidding strategy and classification provided by Google Ads:

  • Maximize Clicks  (Automated Bidding )
  • Target search page location (Automated Bidding )
  • Target outranking share  (Automated Bidding )
  • Target CPA  (Automated Bidding )
  • Enhanced cost-per-click  (Automated Bidding )
  • Target ROAS (Automated Bidding )
  • Maximize Conversions  (Automated Bidding )
  • Maximize Conversion Value (Automated Bidding )
  •  Manual Bidding (Manual Bidding)

https://support.google.com/google-ads/answer/2472725?hl=en

What is Smart Bidding that Google often advocates? Smart Bidding is one of the automatic bidding strategies. It focuses on some conversion-related conditions to help you place the bid automatically. Smart Bidding utilizes machine learning to optimize the bid every time to enhance the conversions or to improve the conversion value better.

The Smart Bidding strategy includes the following:

  • Target CPA 
  • Target ROAS 
  • Maximize Conversions 
  • Enhanced CPC
  • Maximize Conversion Value

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1.Target CPA (Target Cost-Per-Action)

Target CPA can optimize your bid to get the most conversion for your CPA (cost per conversion) goal. Simply put, it is to lower the CPA and advertising cost as well. Based on Kick Ads’ experience, we usually use 3 months of data to determine the CPA bid.

Suppose Sally sells a Japanese candy box subscription service. She calculates that even if she spends USD15 on acquiring new customers, she still has money to pay the remaining expenses. Her goal is to set a cost-per-conversion at USD15. Then Google Ads will optimize her ads to achieve that goal.

In order to maximize the cost per conversion, you must have a great number of keywords and historical data, and to achieve more than 30 conversions in the past 30 days!

Successful case:

Table 1: 18 August 2019 – 17 September 2019 (Manual CPC)

Table 2: 18 September 2019 – 17 October 2019 (Smart Bidding)

We used one month of data to show the comparison. Table 1 shows the Manual CPC’s bidding strategy, and Table 2 shows the Target CPA’s smart bidding strategy.

From the comparison results, although the average CPC is 9% higher than last month (from HK$6.43 to HK$5.93), the conversion rate was greatly improved, growing from 33 conversions in the first month to 41 conversions.  The conversion rate was risen by 24%. Most obviously, CPA fell from HK$812.04 to HK$663.11 at a drop of 18%.

In addition to changing the bidding strategy, we have been optimizing each campaign during the process, and adjusting the Target CPA bidding of each Ad group in time to exchange for a lower CPA.

Conclusion:

1. It is recommended to observe at least two weeks or up to one month. (If the performance is better, the CPA and conversion number/value are ideal, you can keep using the strategy.

2. Only do the testing if you have enough budget and at least 3 months of data. Don’t waste too much energy on campaigns with fewer conversions.

3. Each campaign should have its own independent Target CPA because the Target CPA for different types of keyword/campaign is different. For example, the Target CPA of a brand campaign must be lower than that of a generic campaign.

4. You have to be patient when trying something new. Don’t change the bidding strategy from time to time as it may affect the performance of campaigns.

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2.Target ROAS (Target Return on ad spend)

Return on ad spend (ROAS) is the average value you get for every penny spent on advertising. Target ROAS focuses on achieving the highest conversion value), not the largest conversion. To put it simply, it is how much revenue or value you can get in exchange for a dollar of advertising.

When to use Target ROAS?

You need to have conversion tracking. If you are an E-commerce merchant and you already have a conversion value in Google Ads, you can use it. However, if your Google Ads / Google Analytics does not have a conversion value, you can refer to this article. But if you are mainly on B2B lead generation, you need to set a value for each lead/conversion to use ROAS.

Target Search Page Location

The Target Search Page Location strategy can bring your ads to the top of the first page of search results or display only on the first page. Although this sounds simple, it is a bit complicated. Ranking at the first position does not mean that you can get more conversions. And the position of ad ranking is never the most important consideration. The most important things are the conversion number and conversion rate, so I rarely use it.

When to use Target Search Page Location?

Undoubtedly, ranking at the first of the search results page can increase your ads visibility, but before using this strategy, please review the Auction Insights report to determine the most successful ad ranking. And then check whether this strategy is appropriate in your case.

Target Outranking Share

If McDonald ’s announces an SEM war with KFC, then McDonald ’s may implement the Target Outranking Share strategy. This allows advertisers to specify the competitors they want to surpass and the number of times they want to surpass them. Google Ads will then automatically adjust the advertiser ’s bid accordingly.

Here are different strategy settings

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You can choose several settings. Their meanings are as follows:

Benchmark Domain: The domain name you want to compete with.

Target Outranking Share: The bid percentage you want to bid directly against the competitors.

Max. Bid Limit: The highest price-per-click bid you are willing to pay to beat your competitors.

Bid Automation: “Automation” allows the algorithm to set and adjust bids. “Manual” allows you to enter your own bid.

Low-Quality Keywords: This setting determines whether you want to rank higher on low-quality keywords. The default setting is “do not raise bids”. we encourage advertisers to stick with it.

When to use Target Outrank Share?

As I said before, a higher ranking doesn’t mean anything. The most important thing is to find your own sweet spot.

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3. Maximize Conversions. Try to get a conversion bid

If you have a large budget and want to achieve a higher conversion rate to automate the process, you can consider using this smart bidding strategy. With the Maximized Conversion Auction strategy, Google can optimize the number of conversions instead of the total amount of conversions (total conversion value).

As usual, there is no automatic bidding strategy that can guarantee success. So, please stick with it for at least 30 days, and then check the data to determine whether it is worth using it in the future.

If you plan to use Maximize Conversions strategy, remember to keep an eye on it.

Table 3: 29 August 2019 – 4 September 2019

Table 4: 5 September 2019 – 11 September 2019

The above data are based on real cases. I changed the bidding strategy to Maximize Conversion on 5 September 2019. The main purpose is to see to what extent that Maximize Conversion can increase the conversion.

The results of the testing surprised me after a week!

The cost actually soared by 611%. The CPA rose from HK$20.57 to HK$114.52. Originally, 72 conversions were achieved with HK$1,481.17. But after switching to a new strategy, the cost rose to HK$9,000! Although Impressions and Clicks also increased a lot, but it doesn’t worth spending a lot just to get 20 more conversions than Manual CPC.

We should be careful when using the Maximize Conversion, otherwise it will really outweigh the gains! Personally, I don’t like using this strategy!

Maximize Clicks

If you don’t have a fixed conversion channel and only want users to visit your website, then Maximize Clicks will automatically adjust your bid to achieve that goal.

If your website doesn’t have enough traffic, you should first use Maximize Clicks. You can apply this auction strategy to your ad groups, campaigns, and keywords.

When to use Maximize Click?

If you are creating SEM ads for the first time and have no ideas about the bidding price and conversion of keywords, then you can try using Maximize Click first. It can help bring traffic to your website. When you are about to figure out the correlation of price and ranking of each keyword, you can switch to Smart Bidding or Manual CPC for better performance.

It is an ideal strategy to use Maximize Click as the initial bidding strategy. But the focus of this auction strategy is to bring the most traffic with limited budget because the keyword with a lower price will have a higher proportion, but the keyword with a lower price may not be a good thing if its conversion rate is low.

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4. Enhanced CPC

When the algorithm determines that there is a higher conversion opportunity, ECPC will optimize by increasing the bid to attract the most conversions. If you have a large and flexible budget, and your primary goal is to attract conversions, you can consider this strategy.

What is the difference between ECPC and Target CPA?

With Target CPA, advertisers can set a goal for each conversion, and ECPC will try to attract the most conversions with the maximum CPC limit.

But be careful! ECPC has set a 30% upper limit for bid adjustments in the past, but the limit was lifted in May 2017. This means that your bids may fluctuate more drastically, so strict monitoring is required.

When to use Enhanced CPC?

Enhanced CPC is neither as controlled as Manual CPC nor as smart as Target CPA. Honestly, I rarely use Enhanced CPC in recent years. You are welcome to share with me if you have any experience.

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Manual vs Automated Bid Strategies

Based on our 2 years of experience, Kick Ads has four conclusions in terms of Automatic vs Manual bidding:

1. Manual used to perform relatively well in the past as we can better control the bid of each keyword, thereby adjusting the Average Cost per Click and strictly control the cost to achieve better cost-effectiveness. However, in recent years, the development of Smart Bidding has become more and more mature, and the machine learning behind it has also become more advanced, making the advantage of manual bidding lower.  In addition, Manual Bidding requires manual control and optimization of bids, which requires higher manual and time costs. If the labor cost is included in the cost savings of Manual Bidding, the advantage of Manual is less obvious. There are a number of cases showing that Smart Bidding is better than Manual Bidding. 

2. Smart Bidding also has shortcomings. Smart Bidding performs better in foreign countries because Smart Bidding requires a certain number of conversions to be effectively optimized. It needs more data for Machine Learning to make bidding more accurate. Take Hong Kong as an example, not many companies have more than a hundred or a thousand conversions in Google every month. There are less companies which can achieve more than 100 conversions per month in Google on average. It is not difficult for E-Commerce to achieve over one hundred conversions. But for the service industry, getting more than 100 conversions per month in Google Ads is really not easy. (Of course, this conversion refers to actions that have a direct impact on the business, such as querying or leaving a contact. Conversions such as Contact Page or Subscribe Newsletter are not included.) 

3. What does KickAds usually do? When we create campaigns for new clients, if we don’t know how much we should bid on the keywords, we will first use Maximize Clicks. But remember to set the Max CPC Bid Limit. After about 2 weeks, when you know the bidding range of the keywords, you can switch to Manual CPC to control CPC and CPA more effectively. When the number of conversions has stabilized (let say 3 months later), you can use Target CPA.

4. Set the Average CPA number to Target CPA. Let the system learn, and then gradually reduce the Target CPA bid. It is recommended to replace the bidding strategy of the brand campaign first. You can observe other campaigns for a longer time before changing the bidding strategy. Slowly transfer the less competitive campaign to Target CPA. At this stage, it is better to keep the most competitive or generic keywords / campaign with Manual CPC.

Google has been promoting Smart Bidding in recent years. As the development of machine learning matures, the advantages of manual bidding are getting lower. It is expected that manual bidding will be eliminated gradually. We are always the supporters of manual bidding and do not like using Smart Bidding. But the reality is that Google is the big boss. If you want to play the game, you have to follow the rules. You can choose not to place ads on Google (thinking to go back to Yahoo?Likely Impossible). Another option is to try optimizing your ads performance under Google’s rules. 

 

 

 

 

 

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