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Google AdWords

The Ultimate AdWords Automated Bid Strategy Guide

How much should we spend for an ad? How do we best adjust our budget? How do we optimize our bids? These are all questions all PPC advertisers face, leaving us feeling like a floating pup in space.

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Enter: Automated Bid Strategies, Google’s proposed solution to the two most important questions around bidding:

  1. Are my bids high enough to compete for the most qualified buyers?
  2. Am I bidding too high and showing ads to people who aren’t going to buy?

First, the problem with automated bid strategies…

As the name suggests, automated bid strategies claim to handle all the complicated monitoring and optimization strategies for you. You can sit back, relax, and enjoy your day off.

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Source: giphy

Not so fast.

Google is moving everyone towards these algorithmic bidding strategies.

That means Google is looking to control both the bid market and the prices we pay (our bids). That doesn’t leave a ton of room for competitive advantage or control for advertisers.

Everybody wants to pay the least amount possible to acquire a customer, and Automated bid strategies are good start, but before we dive into what they are and how to use them, we want to share are a couple reasons why 98% of the companies we work with still use Manual bidding strategies. It’s not that solid technology doesn’t exist – we call it AdHawk 😇😈 – it’s that Google’s automated bidding strategies have two important downfalls.

Problem #1 – They’re a Black Box

Automated bid strategies “look for ad auctions that are more likely to lead to [you hitting your KPI]”. That’s a bit vague to hand over total control of your campaigns. The simple formula of how ads are ranked and priced, no matter how arbitrary Quality Score can seem sometimes, is easy to understand.

You lose this transparency when you don’t know which auctions you’re participating in and how you’re bidding.

Problem #2 – Automated Bidding fails to educate you about your ideal customer

The lack of transparency with automated bidding has a larger consequence to your business: you lose insight into who your ideal online audience is. When you analyze your AdWords data to try and identify trends, you discover things about actual human beings and how they behave around your ads and product.

Let me explain: The following two recommendations will help your AdWords account drive more sales.
But tell me this, which has more value to your business:

A) Turn on Enhanced Cost-Per-Click bidding to “get more conversions from manual bidding” (Google’s Enhanced CPC guide).

B) Over the last 30 days, women in Commercial Areas in the United States are 25% more likely to convert on your ads resulting in a lower-than-average CPA. Increase your bids to this demographic by 13% to show your ads more often and drive more conversions for less.

Get to know your ideal customer and tailor your efforts to them. That’s what the second recommendation does: it analyzes a specific demographic, identifies a trend and explains the significance relative to your KPI, and then provides an exact action item on how you can use this information to improve performance.

But don’t fret, my friends! There is still a time and place for automated bid strategies so we want to make sure we set you up for success when you’re deciding between different bid strategies. First we’ll cover the pros and cons of each one, and then go over how to set it all up.

But before we start, let’s brush up on our PPC vocabulary.

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What are Automated Bid Strategies?

Automated bid strategies are automated processes that are designed to maximize your AdWords campaign goals. Google accomplishes this for you by analyzing various ad performance data points including time of day, gender, user device, operating systems, and more.

Automated bid strategies are all portfolio bid strategies (previously called flexible bid strategies), which means that advertisers can apply one strategy across all their campaigns, ad groups, and keywords.

Automated bid strategies include:

  1. Maximize clicks
  2. Target search page location
  3. Target outranking share
  4. Target CPA
  5. Enhanced cost-per-click (eCPC)
  6. Target ROAS
  7. Maximize Conversions

Smart Bidding

Smart bidding is a category of Automated Bid Strategies that uses machine learning to optimize for conversions in real-time whenever an auction occurs. That’s fancy talk for “auction-time bidding.”

Smart bidding strategies include:

  1. Target CPA
  2. Target ROAS
  3. Maximize Conversions
  4. Enhanced CPC

Manual vs Automated Bid Strategies

Automated Bid Strategies are best utilized when you have:

  1. A large and flexible budget, because Google will make optimizations on the fly and advertisers should be ready for drastic changes from time to time.
  2. Significant historical data from previous campaigns that Google can use to to predict future bids.

While the word ‘automated’ might sound like you’ll be on cruise control, you’ll still have to monitor your campaigns, but probably not as much as you would with manual bidding.

If you’ve got time on your hands and have experience with AdWords, manual bidding is always the way to go. It lets you jump on trends sooner than Google’s algorithm. Although more difficult, you’ll have more flexibility and control over your keywords and bids.

Target CPA

Formerly known as Conversion Optimizer, Target CPA optimizes your bids so you can get the most conversions for your CPA (Cost per Acquisition) goal.

Let’s unpack that.

Let’s say Sally sells a Japanese candy subscription box service. After crunching the numbers, she calculates that she can spend $15 to acquire a new customer, and still have money to cover her leftover costs. She’ll set her target Cost per Acquisition to $15 and AdWords will optimize her ads to achieve that goal.

Before You Set It Up…

To maximize your results with Target CPA, you must:

  1. Properly set up conversion tracking
  2. Have large volume keywords
  3. Have historical data: over 30 conversions in the past 30 days

How to set it up

You can set your Target CPA in the Campaigns and/or Ad Group level. Here’s how.

  1. Open AdWords
  2. Select a Campaign
  3. Click Settings Tab
  4. Click on All Settings
  5. Scroll Down to Bid Strategy
  6. Click Edit
  7. Click Change Bid Strategy
  8. Select drop-down menu and select Target CPA
  9. Enter Target CPA
  10. Optional: Click the “Create New Portfolio Strategy” radio button to implement Target CPA across multiple campaigns, ad groups, or ads.
  11. Click Save
  12. Treat yo self!

We’ve also put together a video to help you get started.

For more info on how it works and for best practices, check out our guide to target CPA bidding.

Target ROAS

Return on Ad Spend, or ROAS for short, is the average value you receive in turn for every dollar you spend on your ads. The Target ROAS strategy focuses on driving the highest value of conversions, rather than the most amount of conversions. So they’ll target a $50 conversion over ten $5 conversions.

ROAs-formula
ROAS is calculated using this formula: ROAS = Revenue / Ad Spend

If Sally spent $20 on an ad for her Japanese candy business, which drove $200 in sales, her ROAS will look like this:

Sally's-ROASSally’s Return on ad spend = $200 / $20 = 10.00

When to Use Target ROAS

ROAS measures the total revenue generated while Return on Investment (ROI) measures profit.

ROI-formula

Naturally, your ROI is going to look like a big number and will be 100% at your break-even point, even though you haven’t made a penny in profit.

Some may argue that ROAS is just an inflated metric, but I believe reporting ROAS comes with the expectation that both you and your manager (or whoever you’re reporting to) understands what that metric means.

This is a great strategy to test when you know exactly how much you can afford to pay for a customer, but don’t have the time to get into the nitty gritty of daily optimizations. While it might cause you to overspend, but that’s what you’re giving up for not having to manage it. Identify industry benchmarks and see how it compares to your goals.

How to Set it Up

  1. Open AdWords
  2. Select your Campaign
  3. Click Settings Tab
  4. Make sure you’re on “all settings”
  5. Scroll down and find “Bid Strategy”
  6. Click edit
  7. Click on “Change Bid Strategy”
  8. Click dropdown and select “Target ROAS”
  9. Enter your ROAS as a percentage
  10. Click SAVE

Read more about criticisms against ROAS, best practices, and how it all works via our Target ROAS bid strategy guide.

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Target Search Page Location

The Target Search Page Location strategy helps get your ads to the top of the front page search results or solely on the front page. While this might sound easy, it gets a little complicated.

The first ad position is not the golden ticket to AdWords success. Although you might rake in more clicks, your work is not done. You have to keep an eye on whether those clicks convert and then if those conversions are profitable.

When to Use Target Search Page Location

Being in the top position undoubtedly increases visibility, but before using this strategy, locate your Top vs Bottom report to identify your most successful ad position and see if this strategy is the right fit.

It’s also important to remember that the Google ad auction and quality score ultimately determine your ad position, but this bid strategy will improve your chances.

How to Set It Up

  1. Open up Google AdWords
  2. Select shared library on the bottom left side of the dashboard
  3. Click bid strategies
  4. Click on +BID STRATEGY
  5. From the drop-down menu, select ‘Target Search Page Location’
  6. Fill out the details and hit save.

For best practices and strategies, read our guide to Target Search Page Location.

Target Outranking Share

If Burger King declared an AdWords War with Wendy’s, Burger King would want to implement the Target Outranking Share strategy. This allows advertisers to specify the competitors they want to outrank, and how many times they want to outrank them. Then AdWords will automatically adjust the advertiser’s bids accordingly.

Strategy Settings

There are several settings that you can toy around with. Here’s what they all mean:

Benchmark Domain: the domain you want to compete against.

Target Outranking Share: The percentage of auctions in which you’d like to bid directly against your competitor.

Max. Bid Limit: The highest cost-per-click bid you’re willing to pay to outrank your competitor.

Bid Automation: “Automated” lets the algorithm set and adjust your bids. “Manual” lets you enter your own bids.

Low Quality Keywords: This setting determines whether or not you want to outrank for low quality keywords. The default setting is “don’t raise bids,” and we encourage advertisers to stick with that as well.

How to Set It Up

Target Outranking Share is a portfolio strategy, which means you can apply it across multiple campaigns. Here’s how to set it up:

  1. Open AdWords
  2. Select “Shared Library” in the left-hand sidebar
  3. Click “Bid Strategies”
  4. Click on +Bid Strategy and select “Target Outranking Share”
  5. Name the Bid Strategy
  6. Fill out your settings
  7. Click save
  8. Go back to your campaign and select it
  9. Go to the settings tab
  10. Find “Bid Strategies” and click edit
  11. Click ‘Select a flexible bid strategy’
  12. Select your bid strategy
  13. Click save

Maximize Conversions

If you’ve got a large budget and want to automate your process with the goal of driving more conversions, use this smart bidding strategy. With Maximize Conversion bid strategy, Google optimizes for higher volume of conversions, rather than the amount of dollars your conversion are generating (total conversion value).

Like always, no automated bid strategy is a guaranteed success, so test this strategy out for at least 30 days and review your data to see if it’s worth pursuing in the future.

Before You Set Up

  1. Make sure AdWords conversion tracking is set up
  2. Double check to see that your campaign has its own budget, not a shared budget

How to Set Up Maximize Conversions:

  1. Open AdWords
  2. Click Shared library in left sidebar
  3. Under Bid strategies, click View.
  4. Click +Bid strategy, and select the Maximize Conversions bid strategy

Maximize Clicks

If you’ve got a solid conversion funnel down and you just want users to visit your site, Maximize Clicks will automatically adjust your bids to reach that goal.

You can apply this bid strategy to across your Ad Groups, Campaigns, and Keywords.

How to Set Up Maximize Clicks

  1. Open AdWords
  2. Click Shared library in left sidebar
  3. Under Bid strategies, click View.
  4. Click +Bid strategy, and select the Maximize Clicks bid strategy

Enhanced Cost-per-Click (ECPC)

Enhanced CPC optimizes to drive the most conversions by increasing bids when the algorithm thinks there’s a higher chance for a conversion.

Use this strategy if you have a large and flexible budget with the primary goal to drive conversions.
What’s the difference between ECPC and Target CPA? Well, with Target CPA, advertisers set a target per conversion, while ECPC attempts to drive the most conversions with a Max CPC ceiling.

Be careful, though! ECPC used to have a 30% bid adjustment cap, which was removed in may 2017 across location and audience. This means your bids can fluctuate more aggressively and thus require closer monitoring.

How to set up ECPC for Search and Display

Before you get started, be sure that you have conversion tracking properly set up. Once you’ve done so…

  1. Open AdWords
  2. Click the campaigns tab and select your campaign
  3. Click the settings tab
  4. Find Bid Strategy section and click edit
  5. Choose Manual CPC bidding and check ‘Enable Enhanced CPC’
  6. Click Apply

How to set up ECPC for Shopping

If the data predicts a high probability that a click will convert, ecpc will increase your bid to drive that conversion. But before you get started, make sure conversion tracking is enabled and that you have more than 200 clicks per week. If you don’t drive that many clicks, consider combining your product groups.

Note that ECPC does not adjust its predictions based on device type. So if you drive 50% more conversions on mobile than desktop, set up a mobile device bid adjustment.

  1. Open AdWords.
  2. Click the Campaigns tab
  3. Select your shopping campaign
  4. Click the Settings tab.
  5. Scroll down to “Bid strategy” and click Edit.
  6. Click Change bid strategy.
  7. Select the dropdown and select “Manual CPC
  8. Select Enable Enhanced CPC
  9. Click Save.

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Bidding You Farewell

Whew that was a handful. If you read all that ☝️ and it helped you, please share this with your mom, your friends, your dogs, your cousins, etcetera etcetera. If you have any questions, drop us a comment below or tweet at us @AdHawk! We read every tweet.

Until next time!

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About the Author

Journeyman of the wild wild west of Digital Advertising. Also doubling as an unofficial Taco Bell ambassador. Tweet at me @JonJmPark