Should You Be Using Google Ads Smart Bidding?

Eliot Shiner
Written on March 31, 2020, Last updated on March 31st, 2020
12 Mins

Google’s smart bidding feature has come on leaps and bounds over the last few years. 

Whilst there are still main instances in which manual bidding is more effective, the machine learning that handles the smart bidding strategies has evolved and developed. 

More and more, we’re finding that automated bidding is becoming a useful tool when it comes to managing your campaigns. It’s finally starting to provide great results for us and our clients.

That being said, there are still some limitations you need to be aware of when it comes to Google smart bidding.

Plus, there are lots of smart bidding options open to you, and it can all get a little confusing.

What are Google Ads Bid Strategies

So many bid strategies! What do they mean!?

 

With that in mind, we’ve put together a complete guide for Google smart bidding.

We’re going to cover what smart bidding is, the different google smart bidding options, how you can maximise conversions with campaign experiments, and finally explain the limitations of smart bidding.

Let’s get started with explaining exactly what Google smart bidding is…

What is Google smart bidding?

According to Google themselves, smart bidding is:

“A subset of automated bid strategies that optimise for conversions or conversion value.”

If that’s left you scratching your head, you aren’t alone. That’s a pretty difficult explanation to figure out.

Let’s try to make it simpler.

When it comes to Google Ads, it’s generally a matter of smart bidding vs manual bidding.

With manual bidding, you set the bids for each ad keyword. You can adjust your bids depending on location, device, demographics, and even custom audiences.

If you’re running a lot of different ads, then manual bidding can become a complex and time-consuming task.

Trying to manage manual bidding

This is not sustainable

 

That’s where smart bidding comes in.

Smart bidding uses AI and machine learning to determine the best possible bids that will maximise your conversions.

There are a few different Google smart bidding options to choose from. We’ll cover those soon.

But before we do, let’s take a look at the benefits of smart bidding vs manual bidding.

Smart bidding vs manual bidding

There are a few key benefits to using smart bidding:

✅ More signals

✅ Less human error

✅ Less time-intensive

✅ Real-time bidding

More signals

Signals are different data points that you can use to tailor your ads and target specific groups of people. They’re the backbone of any good Google Ads strategy.

When it comes to manual bidding, you have a few different signals available to you. These include device type, audience, demographic, location, day of the week, and time of day.

With smart bidding, however, the number of signals increases massively. The expansive list includes browser, OS, location intent, and interface language.

 

Add to that the fact that machine learning algorithms are able to handle far greater amounts of data than us measly humans, and you can see why smart bidding enables far greater accuracy when it comes to ads.

Less human error

Humans make mistakes. Each and every one of us gets things wrong.

If you’re having to juggle lots of different ads, ad groups, audiences, and campaigns, then you’re bound to slip up every once in a while.

Whether it’s forgetting to build out/exclude poor performing queries, or accidentally adding a zero to your maximum CPC, these mistakes can be very costly.

Smart bidding is handled by machines. That means it’s far less prone to error.

Sure, human error can still factor in when it comes to strategy or your overall Google Ad settings, but letting a machine take on most of the work will clearly reduce the likelihood of expensive errors.

Less time-intensive

Managing Google Ads can be extremely time intensive. In some cases, it’s a full-time job. That’s why our clients hire us to take care of it.

Smart bidding lets you leave the time-draining nitty-gritty of bidding to the AI.

You can then spend your time focusing on high-level strategy or optimising your ad copy.

If you know what you’re doing with smart bidding, then you can even spend your time on other areas of your marketing and lead gen.

Real-time bidding

When you use manual bidding, you have to continuously tweak your bids to maximise conversions.

You do this by analysing past ad performance and then making any adjustments as you go along. In other words, any optimisation is based on what’s already happened.

Smart bidding, however, makes adjustments in real-time, reacting instantly to ad performance.

Real Time Bidding

Way faster than this, we promise!

 

This means you don’t waste time picking through data to find the relevant parts. It also means your ads will be optimised continuously.

Google smart bidding options

As you can see, smart bidding offers several advantages over manual bidding.

Hopefully you’re raring to get it up and running for your own ads.

But first, it’s best you know about the different types of smart bidding strategies that are available to you.

Smart bidding can be separated into the following strategies:

  • Target CPA
  • Target ROAS
  • Max conversions / Maximise conversion value
  • Enhanced CPC

We’re going to look at each of these smart bidding options in turn, explaining what they are, when you should use them, and the benefits and limitations of each.

Target CPA

What is target CPA?

CPA stands for “cost per acquisition”. In other words, it’s how much you spend on a conversion.

Your target CPA is the maximum amount you’re willing to spend to get a conversion. Too high and you might overspend. Too low and your conversions might suffer.

If your account or campaign has historical data, Google will actually calculate a target CPA for you to use. You can always change this if you don’t agree.

When you use smart bidding with a target CPA, Google will set bids in a way that maximises your conversion rate without going over your maximum amount.

It uses a range of factors, including device, location, and time of day to adjust your bids in real-time. It aims to make your average cost per conversion hit your target CPA.

It’s worth noting that sometimes your bids will be higher than your target. But, combined with the bids that are lower, it should even out.

When should you use target CPA?

If you have a specific acquisition cost that you want to hit, then target CPA is the strategy for you. You can maximise the number of conversions whilst sticking close to the CPA you need.

The benefits of target CPA:

  • Focuses on generating as many conversions as possible. Be sure not to set too low a target CPA or you’ll throttle the performance of this strategy.
  • There’s a lot of maths involved if you want to manually optimise bids but stick to your target CPA. Smart bidding does all of this work for you.

The limitations of target CPA:

  • If your account isn’t set up properly, bids may be set on cheaper (read: lower quality) keywords in order to hit your target CPA. This can reduce the quality of conversions.
  • You need to meet several criteria to use target CPA. You need to be tracking conversions already, and your campaign must have converted a minimum of 15 times in the past 30 days. (The more data the better!)

Target ROAS

What is target ROAS?

ROAS is “return-on-ad-spend”. In other words, it’s the return on investment (ROI) you get from your ads. How much revenue are you generating from every pound spent on ads?

Your target ROAS, therefore, is the ideal ROI you want to achieve with your ad campaigns.

With smart bidding, Google will attempt to hit your target ROAS whilst maximising conversions.

As with target CPA, Google will use a range of signals to determine your bids for each ad in real-time. It will also adjust bids based on your remarketing lists.

When should you use target ROAS?

If you have a minimum ROI that your ads need to achieve, then target ROAS can help you achieve it whilst maximising conversions.

The benefits of target ROAS:

  • It focuses more on profit than conversions. This means you’re concentrating on metrics that align closely with your business goals.
  • If you sell multiple products or services, each with different price points, then calculating the ROI on your ad campaigns can be tricky. Smart bidding is able to automate this.

The limitations of target ROAS:

  • This is arguably the most complex of the smart bidding strategies, therefore there’s plenty of room for error. You need to make sure everything is set up perfectly before you use it.
  • In fact, to use target ROAS at all, you need to have been tracking conversions previously. As with target CPA, you need 15 conversions in the past 30 days, but again, the more data the better.

Max conversions / Max conversion value

What is max conversions?

Max conversions is exactly like it sounds: Google will adjust your bids to drive as many conversions as possible within your budget.

Bids are adjusted based on all the signals available to Google.

Before setting up max conversions smart bidding, you should be aware that Google will happily spend your entire budget. This may work out more expensive that you’re used to if you currently underspend.

What is max conversion value?

Max conversion value is similar to max conversions, only it focuses on the value of conversions rather than just the number of them. Otherwise, it works in much the same way. Just be careful not to get them mixed up.

When should you use max conversions?

If you simply have a set Google Ads budget, then max conversions will help you get the most conversions you can with the money you have.

The benefits of max conversions:

  • This smart bidding option focuses on driving traffic to your site. As a result, it’s the most effective way of doing so.
  • If you’re taking a straightforward approach to Google Ads (ie. you have a budget and want the most traffic you can get) then max conversions is the easiest way to do it.

The limitations of max conversions:

  • You lose control over other important metrics such as CPA. If you need to measure that, then the other smart bidding options are more suited.
  • The focus on driving traffic can mean lower quality conversions, plus the results you get are generally less meaningful.

Enhanced CPC

What is enhanced CPC?

Enhanced-cost-per-click (ECPC) is designed to maximise your conversions from manual bidding. In that sense, it’s a hybrid of smart bidding vs manual bidding.

It works by adjusting the manual bids that you’ve set depending on the likelihood of conversion. In other words, if Google thinks a click is more likely to lead to a sale or conversion, then it’ll increase your bid.

ECPC always tries to keep your average CPC below your maximum CPC, even taking bid adjustments into account.

Due to the combination of smart and manual bidding, ECPC doesn’t use the full range of signals that other smart bidding strategies have access to.

When should you use enhanced CPC?

ECPC takes both your CPA and CPC into account. If you’re juggling both of these then you should choose this option.

The benefits of enhanced CPC:

  • If you aren’t ready to give complete control to Google’s algorithms, then ECPC is a good way of maintaining an input while utilising the smart bidding features.
  • Google will adjust bids that it doesn’t think are likely to convert to actual sales. This means you won’t spend as much money on low quality clicks.

The limitations of enhanced CPC:

  • ECPC isn’t completely automated. You still have to set the original CPC. If you’re looking to be totally hands off, then the other smart bidding strategies may be more suitable.
  • The full range of signals that other smart bidding options can access aren’t available to ECPC strategies. This may reduce the accuracy of the algorithms.

How to test and measure Google smart bidding

There’s no use in implementing these Google smart bidding strategies if you don’t know how effective they are. That’s why you should always aim to test and measure results.

Fortunately, Adwords offers a simple way to do just that by running campaign experiments.

These experiments can show you the impact of smart bidding strategies on your campaigns, based on a metric of your choice.

If you’ve never made a campaign experiment before, here’s a handy video guide from Google, though we’ll explain in more detail further below!

Start by navigating to the left-hand menu. There you should see a menu item called “Drafts & experiments”.

This will show you a list of current drafts. If you haven’t run any experiments before, then this will be empty.

Click on the blue plus sign and it will prompt you to choose an existing campaign.

NOTE: Experiments are run on current ad campaigns. You need to have those set up before you can start testing.

Once you’ve chosen a campaign and given the draft a name, you can start creating your experiment.

Make sure that you’ve now selected the new draft campaign that you created. The name will be on the top corner.

Then head to “Settings” and go to the “Bidding” section. You’ll now be able to change your original campaign’s bidding strategy to one of the smart bidding strategies we’ve covered.

Note: Ensure you apply the automated bidding to the original campaign so that data can be carried over if you choose to continue with it after the experiment. It’s also worth noting you can’t apply this to shopping campaigns (at least for now).

Select your chosen strategy and click “Save”. A box will pop up asking you whether you want to change the original campaign or run an experiment.

You need to choose “Run an experiment”. You’ll be asked to name your experiment as well as set start and end dates.

It’s worth bearing in mind that you can’t edit these dates once you start running the experiment. Make sure you leave enough time to collect a good amount of data, otherwise it’s hard to draw conclusions.

You can also choose how much budget you want to allocate to both your original campaign and experiment. Clearly, if you’re wanting to fairly compare two strategies, each should be given 50% of the budget.

After your experiment has been up and running, you’ll hopefully have some data to start analysing. You’ll be able to see a wide range of useful metrics, such as CTR, costs, and conversions.

Ideally, you’re going to want somewhere between 75 to 100 conversions per month. This is a good amount of data to draw accurate conclusions from. If you aren’t getting that many conversions, you’ll have to wait longer for the data to come in.

Portfolio bid strategies

You should also consider using portfolio bid strategies to make your various smart bidding campaigns more manageable. This will also give you access to the bid strategy report, which we’ll get to in a few moments.

A portfolio bid strategy enables you to group together different campaigns, keywords, and ad groups. The benefit of this as far as smart bidding is concerned is that you can collate your smart bidding strategies and have them be automatically managed as one group. 

Google will set bids automatically across the grouped strategies to best reach your goals. For example, if you want to ensure a maximum CPC bid on your automated strategies, then you can set this at the portfolio level. This gives you extra control over your bidding, whilst still having the firepower that smart bidding strategies provide.

Another reason to consider portfolio bidding is that you then get access to the bid strategy report. 

This report includes all the metrics you need to assess how effective each of your smart bidding campaigns are. It’ll show you the top signals that campaigns are using, a scorecard for the key metrics, a conversion delay metric, and a performance score.

You can use this report to quickly and easily compare your different smart bidding strategies, and see which work best for you.

You can also see individual bid strategy reports for each smart bidding strategy you use, though of course, it’s harder to compare them in this way.

Why you shouldn’t use Google smart bidding

It’s safe to say that Google smart bidding has improved a lot in recent years, and can be a powerful tool when used correctly.

But having said that, there’s a major limitation you should be aware of:

If you don’t have the right volume or level of data, then smart bidding will be ineffective.

Google offers various guidelines in terms of the data you need to have coming in for smart bidding to work as it should.

For Target CPA strategies, for example, Google recommends using it on campaigns that have had at least 30 conversions in the last 30 days. But to actually gain the true benefits of smart bidding (ie. fast learning, low fluctuation) you need to have had several hundred conversions.

This presents a kind of paradox. For smart bidding to truly be effective, you need to already be running relatively successful campaigns. Which begs the question, why would you bother changing anything?

Smart Bidding Disadvantages

You need data, otherwise, you won’t get very far with smart bidding

 

The point is, if you’re new to Google Ads, and you haven’t been running many campaigns (at least successfully) then smart bidding probably isn’t the best approach for you. Instead, we would recommend experimenting with manual bidding until you find something that works. Then once you’ve built up the data, you can start looking to automate it with smart bidding strategies.

Final thoughts

Google smart bidding is incredibly useful when it comes to improving your Google Ads performance. Not only can the AI make better, more data-driven decisions, but it also frees up your time so you can focus on strategy, creative ad copy, and optimising your landing page. It’s a win-win.

The best course of action if you’re new to the various smart bidding options is to simply create a test campaign and start experimenting. The only way you can truly know which smart bidding options are best for your business is by trying them out.

We wish you all the best with your smart bidding experiments, and we’re always here if you need a hand.

Thanks for reading!

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