Understanding Google Smart Bidding in 2020

26 May, 2020

Smart bidding has evolved significantly in recent years to meet the growing challenges facing Google Ads accounts. 

Automated bidding strategies have been a source of skepticism from old-school account managers for many years; despite this, Google is continuing to push Smart Bidding as an important way to manage bids with sustainability and performance in mind.

Google is very serious about Smart Bidding, as well as the broader adoption of their machine learning technology. 2020 even saw a policy update in which an account’s Google Optimization Score and adoption of automation is now directly tied to whether or not your business can be listed as a Google Partner.

It stands to reason, then, that if you haven’t started trialling Google’s Smart Bidding yet, now might be a good time to run a few experiments. Automation isn’t going away any time soon.

Why Smart Bidding?

Smart bidding basically means “allow Google to adjust my bids for me where it expects to see the best performance in line with my business goals.”

“Let Google choose my bids,” you say? “Pfft!”

If your first reaction to handing over the reins in such a way is similar to the above, you’re not alone. Smart bidding remains controversial around the PPC industry, with some absolutely convinced their own manual bids are best, while others have chosen to automate entire accounts.

Like most things PPC, there isn’t a single correct way to manage your bids - anyone who says otherwise is either fibbing, or hasn’t tested sufficiently.

At a Glance: Google Ads Smart Bidding

Smart bidding is pretty complex behind the scenes, but its goals, and how it works more broadly are fairly straightforward.

  • Google measures a vast range of metrics including clicks, impressions, click-through-rates, conversion volume, conversion rates, impression share, ROAS and more.
  • On top of this, they measure these metrics against a range of dimensions, including user device, location, demographics and audience characteristics, as well as what day of the week and time of day they search.
  • Each unique combination of these may require a slightly different bid for optimal results. 
  • Someone searching at 7pm, from London on their mobile, for example, may be more likely to convert than someone at 4pm in Sheffield on their tablet.
  • Managing so many bid adjustments manually is a massive undertaking, especially with a large account. Smart Bidding helps by automating these bids for you based on historical performance data.
  • This may save you an awful lot of time and, more importantly, it can identify opportunities you may have missed to improve performance.

Should you use Smart Bidding?

As with most things in the PPC world, it depends.

But that isn’t particularly helpful, so let's expand on that.

You should definitely be experimenting with automation and evaluating its effectiveness in the context of your own account and the data you see.

Here’s why you should be testing Google Smart Bidding strategies:

  • It can identify data patterns and the opportunities they present quicker than we can.
  • It can work with massive data sets and a huge range of interconnected touch points. Unless you’re an Excel wizard with plenty of time on their hands, this is almost impossible to replicate to the same degree of accuracy.
  • It can calculate optimal bid adjustments mathematically, based on what is most likely to be successful.
  • It can take care of hours upon hours of potential grunt work, meaning you can focus your attention on other key areas.
  • You still remain in control of key areas, including KEYWORDS, NEGATIVE KEYWORDS, BUDGETS and AD COPY.

Machine learning can generate ads and manage keywords for you, but that’s another matter.

Here’s why you shouldn’t use Google Smart Bidding strategies:

  • You shouldn’t use Smart Bidding as a complete substitute for close monitoring and evaluation of performance data. Even if you are giving Smart Bidding the reins, you must still be aware of what is happening and, of course, whether it’s working.
  • You shouldn’t use Smart Bidding in an attempt to push unrealistic goals or unsustainable strategies. Google will continue to spend your money, even if the targets are unfeasible - more on this below.
  • You shouldn’t assume that Smart Bidding understands the complete picture of your business and its KPIs. It responds only to the data it has access to.

Google updates its Smart Bidding strategies fairly regularly in response to what it believes advertises will benefit the most from. 

What follows is a concise breakdown of each of these, along with some pros and cons of each, and some tips if you want to test them out yourself.

Enhanced CPC (eCPC)

Enhanced CPC (sometimes known simply as Manual Enhanced CPC) is exactly what the name suggests. This bidding strategy takes your manual CPC (cost-per-click) bid and tweaks it automatically based on how likely it is to convert or deliver conversion value.

If your Maximum CPC is set at £2.00, for example, Enhanced CPC will allow Google to automatically boost this where it sees improved chances of conversion, potentially boosting your bid to £3.00 or more. 

Google states that it uses “auction-time signals such as browser, location and time of day to tailor bids to the unique context of each search.”

But what about max spend? 

If you are working to a tight budget, you may be concerned about the sustainability of the higher CPCs that eCPC can influence. Google assures us that, while eCPC may result in spend spikes, overall average spend will not exceed budget over an extended period of time.

Pros of Enhanced CPCCons of Enhanced CPC
Improve your chances of gaining conversions without having to manually adjust bidsCPCs may become significantly higher.
Automatically identify individual searches with maximum intent.It requires flexible budgeting and the ability to spend more at certain times.
You can automatically optimise for either conversion volume or conversion value (revenue)Requires a good amount of historical data; it is not suitable for brand new accounts.

Target Based Smart Bidding

Got strict business targets? Well, who doesn’t? If so, these Smart Bidding strategies could be ideal.

Target CPA

Your CPA is your cost-per-action. The action is whatever goal your website is set up to achieve; this might be conversions, leads, sales, subscriptions or mobile app downloads. CPA is one of the most important metrics when measuring the cost-effectiveness of your advertising.

This smart bidding strategy lets you set a specific Target CPA; Google will then optimize bids based on the likelihood of sustaining an average CPA in line with this. It will then try and generate as many conversions as it can below this CPA.

If CPA is a KPI for your business, this bidding strategy is certainly worth testing, but with a few considerations…

Pros of Target CPACons of Target CPA
Automatically set bids to maximize conversion volume within a preset Target CPA that works with your strategy.Your target CPA must be realistic. Google will not be able to match any target CPA that you set if not feasible. It will give you an estimated Target CPA it believes it can achieve. If this is too high, Target CPA may not work for you.
It will automatically cut spend in areas that are less cost-effective.Like eCPC, Target CPA requires a lot of tracked historical conversion data to work; the more data you have, the more accurate the smart bidding will be.

Another important thing to remember about Target CPA is that you should set this individually for each campaign that has a different product value. Some conversions are likely more valuable than others.

Target ROAS

Your ROAS is your Return on Ad Spend. Essentially, this is your advertising ROI. Again, this is often one of the most important performance indicators for accounts in which it applies.

If you are targeting a ROAS of 500%, for example, this smart bidding strategy will employ a similar method as Target CPA to try and drive as many conversions as it can, while aiming for the desired ROAS.

It does this by predicting which users are most likely to generate a ROAS that is in line with your target. Once again, this needs lots of historical data to work.

It is recommended that you start testing Target ROAS with a target that is slightly lower than your current account average; you should then increase this incrementally and observe what happens to your average ROAS.

Pros of Target ROASCons of Target ROAS
You can stay in control by setting bid adjustment limits manually to prevent Google pushing bids too high in pursuit of your target ROAS. This, however, may make it less effective and is not recommended.Like Target CPA, your targeted ROAS must be realistic to work effectively. For Target ROAS to work, you should target a ROAS that is currently being achieved (slightly less than your overall average) and work upwards steadily. Simply entering a target ROAS that is double/triple your current average will not do the trick.
Automatically prioritise spend for searches that are more likely to deliver the best ROAS. At the same time, it will reduce spend on those with a lower ROAS, thereby improving your account average.Like with most Target based Smart Bidding strategies, this is most effective when there is a lot of historical revenue (Conversion Value) data. Without this, machine learning will not be able to predict accurately.

Target Impression Share

Your impression share is an important competitive metric. It tells you how often your ads are appearing for potential searches. This is a percentage figure. An impression share of 80%, for example, means you are appearing on the SERP for 80% of the total searches being made that fit your targeting criteria.

Put simply, the higher your impression share, the more often your ads are being seen. There are three main types of impression share that you will see in the Google Ads interface, and you can read more about that in our blog on the subject.

As the name suggests, Target Impression Share lets you set a desired average impression share that Google’s machine learning will aim to achieve.

Pros of Target Impression ShareCons of Target Impression Share
Impression share is directly linked to the likelihood of getting clicks (your ads must still be good!). By automatically targeting an improved impression share, you can improve your chances of being seen before your competitors.Average CPC is one of the main contributors to ad rank. Achieving your ideal impression share may push your Max CPC beyond the point of profitability. Be sure to set Max CPCs as a backup when setting up this strategy.
Target impression share can also be used to cut costs if CPCs are too high. Rather than decreasing bids incrementally, try decreasing your impression share. That way you can be more confident in the potential impact of your changes.Impression share does not necessarily mean better performance. Always refer back to your KPIs when experimenting with impression share or other competitive metrics.

Target Outranking Share

Got a key competitor that you wish to outrank? Target Outranking Share could be the smart bidding strategy for you. Similarly to Target Impression Share, this smart bidding strategy uses machine learning to set bids that improve the chances of appearing above ads from another domain.

While an effective tool for competitive markets, there are some things you need to be aware of with Target Outranking Share

  • Target Outranking Share will only aim to achieve an ad rank that is higher than the competitor dominan that you set. This might not improve your overall impression share or ad rank.
  • If your competitor is also trying to outrank you (they might even be using the same smart bidding strategy), things can get very expensive very quickly. Be careful that you do not start a bidding war (unless you can afford it!)

Target Search Page Location Bidding

If you are interested in maintaining a strong position on the search results page, but aren’t concerned about specific impression share, Target Search Page Location smart bidding lets you set a slightly broader criteria.

This strategy lets you automatically target a position either at the top of the page or anywhere on the first page. 

Pros of Target Search Page Location BiddingCons of Target Search Page Location Bidding
A simpler way of sustaining a relative position on the SERP. If you want to automatically bid what is required to appear at the top of the page, this bidding strategy could be very useful.This bidding strategy doesn’t take specific competitors into account; if you want to outrank competitors, try Target Outranking Share.
If you are in a highly competitive space where top of page bids are too expensive, you can use this to sustain a more affordable (but still visible) position on page 1.Being at the top of the first page can be expensive. If you are working towards a strict CPA or CPC target, you might find sustaining a top of page position too expensive.

Maximize Results through Smart Bidding

The previous smart bidding strategies were all about setting specific targets for Google’s machine learning to hit for your account. The following strategies are all about maximizing certain performance metrics without setting specific targets.

Each of these smart bidding strategies is ideal for use with campaigns that are restricted by budget, as they are built around getting the maximum performance value out of a limited spend.

Maximize Clicks

This one does exactly what the name suggests. If you have a limited budget but want to get the most clicks possible for your money, this smart bidding strategy can help. This is also very useful if you have a consistently strong Conversion Rate and want to increase your clicks accordingly.

Here are a few key points to consider when testing Maximize Clicks

  • This smart bidding strategy will not use conversion data. It will assume all clicks are valuable and will optimise for the best Click-Through-Rate.
  • Certain clicks will be more likely to convert than others, so always keep an eye on your conversion performance when experimenting with Maximize CPC.
  • As with most smart bidding, you should set a maximum CPC as a backup.

Maximize Conversions

Maximize conversions is very similar to Maximize Clicks. As the name suggests, it uses machine learning to set bids based on maximizing total conversions within your budget. Once again, though, there are some considerations:

  • Maximize conversions requires accurate conversion tracking, as well as plenty of historical data. The bidding strategy learns by analysing existing data. The more data you have, the more accurate its predictions are.
  • Conversions may not all be equal. If your account is based on driving profit (ROI), Maximize Conversions will disregard this. For example, one conversion may be worth £50 to you, while another may be worth £200. If there is a greater conversion rate for the £50 conversion, the smart bidding will prioritise this over the more lucrative conversion.
  • If ROI (or ROAS) is your priority, we would suggest trying Target ROAS or Maximize Conversion Value instead.

Maximize Conversion Value

Once again, this smart bidding strategy aims to optimize your bids automatically based on conversion data; this time, however, it’s looking at conversion value (revenue). If you are looking to maximize the amount of revenue coming from your ads while staying within a set budget, this smart bidding strategy could be ideal.

Google states that Maximize Conversion Value sets your bid automatically, prioritising the conversions that are the most valuable for your campaign while spending your budget.

Once again, there are some key points to remember:

  • You must have accurate conversion value tracking in place, along with plenty of historical data. Without this, Google has nothing to base its predictions on.
  • This bidding strategy will not necessarily prioritise the highest value items in your catalogue; for example, if Google believes you will see a greater revenue from a high volume of lower value sales than one or two higher value sales, it will prioritise the former. Keep this in mind if you have priority products that you are trying to sell.

Test, Test and Test Some More

When it comes to smart bidding, there is no single, defined strategy that is best for your account type. There are so many variables at play, one ecommerce account could be very different to your own. When introducing smart bidding, the secret is a robust and disciplined testing plan.

What this means is ensuring that each smart bidding strategy you try is tested properly. By proper testing, I’m talking about…

  • Ensuring test conditions are fair. You should test a new strategy alongside your current one, ideally using the same keywords at the same time, thereby removing some variables.
  • Split testing using Drafts & Experiments within Google Ads is a great way to do this.
  • You should also ensure that the data gathered while testing is statistically significant. If you run a test where one strategy gains you 10 conversions and another gains you 12, this is technically an increase of 20% - but it is not significant. It only takes a couple more conversions to completely change the picture. If this was 100 conversions versus 120 conversions, you can evaluate with more confidence

If you’re interested in testing smart bidding using Drafts & Experiments, we have a full blog on the subject.

Written by Tom

Tom cites his key strengths as communication, writing and presenting. He enjoys working in digital due to the way it satisfies both the creative and logical sides of the brain.

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