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Smart Bidding With Google AdWords & Bing Ads

Jason Martin's picture

Cost per click (CPC) bidding has been the bedrock of Search Engine Marketing for years, with advertisers setting the maximum amount they are willing to pay for a click on their keywords. This is used in a bidding auction to determine where their ad appears in search engine results, and whether users could find and “convert” on their website.

Times are changing, though. Using data that we can’t access and wouldn’t be able to manually comprehend, Google and Bing Ads have provided alternative bidding strategies that combine the bidding input and historic performance with the detailed learning of their respective AI systems.

In this piece, we run through Manual CPC bidding as well as two forms of Smart Bidding strategies, known as Enhanced CPC (ECPC) and Target CPA bidding.

Manual CPC Bidding

Manual CPC bidding is the default bidding tool in Google AdWords and Bing Ads. At its core, you are treating every user and every click the same, focusing on the keyword rather than the user.

You specify the highest bid that you are willing to pay for a single click on a given keyword – a Max CPC –  which is then used (alongside other indicators such as quality score) to determine the position that your ad appears in on search engine results pages.

Your actual CPC will be based on the amount needed to put you above the person below you in the ad rankings, but never more than your maximum CPC (unless you are using other bid modifiers, but for argument’s sake you aren’t in this example).

More details on the auction process can be found within our PPC Marketing Guide.

To summarise, manual CPC bidding is the strategy that gives you the most control over your bids but also means you aren’t able to capitalise on what you aren’t seeing. You are treating both high and low quality leads the same, which leaves some room to improve your conversion rates.

Target CPA Bidding

Target CPA is a form of smart bidding that aims to get you the maximum number of conversions possible for a given cost per conversion figure, supplied by the user. Using machine learning to continually improve its targeting approach, Target CPA can tailor bids for every individual keyword auction in order to use your ad budget as efficiently as possible.

There are some situations where Target CPA can offer conversion potential that other bidding strategies cannot match – especially if your entire business process is online. If Google AdWords can see your entire process from start to end – such as buying a service online – then it can use the complete picture to maximise the conversion potential of your campaigns.

Google AdWords Display campaigns, more traditionally used for branding and awareness purposes, can use Target CPA bidding to become another source for driving conversions. This provides you with a much wider target audience on Google’s Display Network, rather than just using Google’s Search Network.

There are drawbacks to using this bid strategy, however. If there is an offline element to your business, things can get complex as Google can only optimise what it sees. For lead generation accounts that rely on leads turning to sales in an offline environment, Target CPA may generate numerous leads at a good cost per acquisition that may be deemed to be low quality by sales teams. As this breakdown in the sales process takes place offline, Google cannot “optimise” bids to take offline actions into account, meaning that the same quality of quotes may persist and affect overall cost per sale rates.

Target CPA also isn’t suitable if there are frequent fluctuations in targets, stock or availability. If you are an advertiser who increases and decreases bids significantly there and then, Target CPA isn’t a suitable solution. When bid increases and decreases are made for Target CPA, the process is gradual and takes longer to settle in than with CPC bidding – patience is required. Significant changes make the campaigns go into a “learning phase” that can last up to 7 days. This involves the campaign readjusting to the changes in order to continue providing the most conversions possible over the long term. In the short term, however, this can impact performance and is something to be aware of.

Finally, Target CPA operates at an ad group basis, whereas CPC and Enhanced CPC works at a keyword basis. You can’t provide individual Target CPA bids for each keyword, meaning that if one keyword is performing badly in an ad group then your only immediate option would be to pause the keyword or adjust the entire ad group Target CPA, which would have a knock-on effect to the other better performing keywords in the ad group.

Target CPA is available across Google Search and Display campaigns, and is currently unavailable for Bing Ads. Google requires that you have conversion tracking enabled and have tracked at least 30 conversions in the last 30 days in order for their algorithms to have sufficient data to work with.

In terms of implementing Target CPA Bidding, you initially set the bid at campaign level:

Once this is done, you are able to set CPA bids at the following levels:

  • Campaign
  • Ad Group
  • Device – Desktop/Mobile/Tablet

To summarise, Target CPA is more of high- risk, high-reward version of Enhanced CPC bidding. When used in a stable online environment, the CPA bids can flourish and boost conversion volumes, but should be treated with caution elsewhere.

Enhanced CPC (ECPC) Bidding

This can be considered the lovechild of Manual CPC bidding and Target CPA bidding, offering a slightly more “AI” approach to your bids whilst retaining a stronger degree of control over the bids yourself.
Enhanced CPC allows Google and Bing to modify your bids based on who they feel is more likely to convert to a conversion. This is based on many factors including:

  • Your historic performance
  • Device
  • Location
  • Time of day

Despite being able to bid up and down for clicks deemed to be higher or lower quality, the premise of ECPC is to ensure that you retain the same cost per conversion that you are seeing with manual bidding.

Should you need to make drastic bid changes in the account, you are able to change CPC bids to sharply increase or decrease click volume and spend. This does mean that enhanced CPC will need to take time to readjust to the new bids, but the effects won’t be as drastic as that of Target CPA bidding.

To demonstrate how ECPCs work in theory, let’s walk you through a fictitious example:

Your keyword “marketing agency Northamptonshire” has a Max CPC of £1 and generates 100 clicks in August, spending £100 for the month. This PPC marketing has generated 20 conversions at a cost per conversion of £5 using the Manual CPC bidding strategy. This is working well for lead generation, and you would like to increase leads further for September.

To do this, you have two options. You can use the existing Manual CPC bidding strategy to bid more for increased click volume. This means that your cost per lead will increase, even if your conversion rate remains the same.

Or you can trial the ECPC bidding strategy in the campaign. This allows CPC bids to fluctuate as high as £1.30 and as low as £0.00 for bid auctions, all whilst aiming to replicate the existing cost per lead figures in the campaign.

A mock up of predicted results may look as follows:

What ECPC aims to do is provide you with increased conversions by improving your conversion rates, whilst maintaining the same cost per conversion levels as seen previously. This is done by adding bid increases and decreases in bid auctions based on traffic that Google deems high quality for your account, using your budget wisely and essentially “getting more for less”.

As mentioned above, ECPC bids aim to retain our cost per conversion over a 30.4 day period. For this reason, search engine providers suggest a minimum of one month to run the bidding tool in order to assess its effectiveness. 

Enhanced CPC is available on Google AdWords and Bing Ads across Search, Display and Shopping campaigns. Enhanced CPC is available to all advertisers, providing that they have conversion tracking enabled in their Google AdWords and/or Bing Ads accounts. In Google AdWords, enhanced CPC is now enabled by default when new campaigns are created, but can be changed by using a simple tick box in Campaign Settings:

Whilst in Bing Ads you can select the option from a drop-down menu in Campaign Settings:

Summary

To summarise, there are strengths and weaknesses for each of the three bidding types, which can be summarised as follows:

Should you be interested in Smart Bidding, we would recommend running a month-long trial for the bidding strategies to begin with. It may be tempting to revert bidding strategies after a couple of bad days, but it’s crucial to have patience with the machine learning while it gets itself up to speed with the bidding landscape in order to boost your conversions.

You can run a trial by using Google AdWords’ Campaign Drafts and Experiments feature, or by switching the bidding type for one month and assessing performance to the previous month on Google AdWords and Bing Ads.

Interested in Finding Out More?

Here are a selection of handy articles surrounding the different bidding strategies:

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