Smart Bidding refers to automated bid strategies that use machine learning to optimise for conversions or conversion value.
The algorithms consider three broad data categories (signals from the user, signals from the advertiser and signals from Google) to find the best individual bid for each and every auction.
It’s fair to say Smart Bidding has been met with some scepticism and the two questions we hear over and over again are:
Are we all going to be replaced by machines?
Is it really that “smart”?
Firstly, algorithms can only work with the tools they are given. Algorithms don’t have an advertising “brain”, they don’t understand your audience, they can’t understand subtleties in search intent and they can’t write a great ad.
Not yet anyway!
Joking aside, search marketers can spend up to 80% of their time dealing with manual tasks and applying automated bid strategies can free up some of this time to allow us to think bigger and more strategically than before.
At SearchStar, bidding has always been the last lever we pull and applying an automated bid strategy is no different.
Which bidding strategy should I use?
There is no “one size fits all”. If you’re a direct response advertiser whose goal is conversions and/or revenue there are four Smart Bidding strategies to familiarise yourselves with.
You should choose the strategy (or combination of strategies) that align with your business goals:
eCPC (Enhanced Cost per Click)
Target ROAS (Return on Ad Spend)
Target CPA (Cost per Acquisition)
Maximise Conversions
eCPC:
Enhanced CPC works with your manual bids and raises or lowers them on your behalf depending on whether the click is deemed to be more or less likely to convert.
In theory, this bidding strategy should increase your conversion rate. Having said that, it may result in more expensive conversions as a result of bidding more aggressively, particularly as there is no cap on how much Google can bid on your behalf.
However, this bidding strategy does allow the advertiser to retain some control over their bids, making it a good option for those who are taking their first steps towards automation.
Maximise Conversions:
Maximise Conversions aims to get you the greatest number of conversions for your campaign within the set budget. In order to use this bidding strategy, each campaign will need its own budget (as opposed to shared budgets).
You should also check the campaign daily budget prior to switching to Maximise Conversions as, once enabled, it is very likely you will spend the entire budget which could increase your cost per conversion.
Target CPA:
With Target CPA bidding you set your target cost per conversion and Google will override your bid modifier and automatically optimise your bids to get you as many conversions as possible for the cost per conversion you have set.
Google recommend this strategy if your goal is to maintain an average CPA across a portfolio of keywords. Be aware that if you set your CPA target too low, Google may achieve it but at the expense of conversion volume.
Target ROAS:
With Target ROAS you set your target “return on ad spend”. Google will override all your bid modifiers (by device, location, age etc...) and will automatically optimise your bids to maximise your conversion value while trying to achieve an average return on ad spend (ROAS) that aligns with the target you have set.
As this algorithm is required to predict the value of future conversions each campaign must have at least 15 conversions in the past 30 days. However, we recommend only trying this bidding strategy on campaigns with 50 conversions or more in the past 30 days.
Target ROAS is the only Smart Bidding strategy that considers conversion value, enabling advertisers to optimise towards ROI. Bear in mind that with eCPC, Maximise Conversions or Target CPA, you may see a higher volume of conversions but they might not be as valuable to you as a business.
Does Smart Bidding Actually Work?
Don’t expect results right away – the machines need time to learn and “how long” will depend on the volume of conversions going through each campaign; the more data they have the faster and more accurately they can learn.
Also remember that every time you make a major change to the account, you’re asking the algorithm to work with new parameters, so it’s essentially starting from scratch.
Here are the results from a 50/50 manual/eCPC bidding test. “Experiment” shows the results we saw from eCPC bidding – conversions were up 60% and cost per conversion was 6% cheaper.
Source: Travel Client, 6 weeks’ of data
Here are the results from an account where we are trialling Target ROAS. The campaigns saw a 7% increase in ROAS vs. the manual bidding.
Source: Travel Client, 6 weeks’ of data
Summary
Choose your bidding strategy (or combination of bidding strategies) that align with your business goals and remember that the algorithms can only work with the tools they are given.
Get your campaign structure, ads and landing pages in order first so that if/when you do decide to trial an automated bidding strategy you are able to commit to letting the machines do their learning. Automation, when given the right tools, is a good thing.
