AdWords Bid Strategies

AdWords Bid Strategy Types Explained

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Google AdWords offers 8 bid strategy types to determine what price your bids will be set at:

  • Target Search Page Location
  • Target CPA
  • Target ROAS
  • Target Outranking Share
  • Maximize Clicks
  • Maximize Conversions
  • Enhanced CPC
  • Manual CPC

The first 7 are automated bid strategies, meaning AdWords will adjust your bids as that particular strategy’s algorithm sees fit. Manual CPC is the only strategy where you can be sure your bids are static, and even with that strategy, you need to make sure “enable enhanced CPC” is not checked to avoid it reverting to an automated strategy.

Why is understanding your bid strategy important?

You bid strategy is essentially telling AdWords “we will pay up to X amount per click/per customer/per dollar of revenue”.

If your bids are too high, you will likely show up high on the page, but your budget will burn out more quickly.

If your bids are too low, you might get a stronger return, but AdWords won’t give you as many impressions which will lead to fewer customer acquisitions.

The key is finding a bid strategy that aligns your bids with your budget and customer acquisition goals.

Here’s a quick summary of how each strategy works and when it may be a good idea:

 

Target Search Page Location

How it works:

You can tell AdWords you want to either target the top of the page (1st position) or target being on the first page. AdWords will raise your bids automatically to increase your chances of showing up in your desired location on the page.

When to use it:

We rarely recommend using this strategy for a couple of reasons. The first is that you don’t have control over how high AdWords raises your bids. This can obviously hurt performance if required bids to reach a certain position are much higher than you expected.

Another reason is that it can increase the overall cost to advertise on the keyword you are bidding on. AdWords works like an auction and you are basically saying you will bid as high as you need to.

Target CPA

How it works:

Target CPA (cost-per-acquisition) has you enter your ideal CPA with AdWords changing bids to try to achieve this goal. You will need some historical conversion data for it to optimize on, although it can still work well without large amounts of data.

When to use it:

Since AdWords doesn’t give a lot of insight into how the algorithms help you achieve your target CPA, you are putting a lot of faith into Google by using this strategy. However, we have generally seen it work pretty well. It’s likely best used as a test to start to see if it outperforms more traditional cost-per-click strategies.

Target ROAS

How it works:

Similarly to Target CPA, Target ROAS has you enter a Return on Ad Spend goal that it will try to hit. In theory, this one makes the most sense for an automated strategy since ROAS gets us closest to actual ROI for marketing investments.

When to use it:

Again it’s likely best used as an experimental campaign first. One note with Target ROAS is that you need more data comparatively to Target CPA (See chart below), so keep in mind this will likely only be a consideration for larger budget campaigns. You also have to be tracking revenue or some sort of value for your conversions in order for this to work.

AdWords Learning For ROAS

Target Outranking Share

How it works:

Target Outranking Share allows you to pick a competitor’s domain and tell AdWords to outbid it. You can set a maximum bid as well as a “% of time to outrank” so that it doesn’t burn your budget too quickly.

When to use it:

This is best used when dealing with a specific competitor that continually outranks you. It can be a risky strategy for the same reasons as Target Search page Location: it is likely to raise the overall auction prices long-term. However, the maximum bid and % outrank options make a feasible option in some cases.

Maximize Clicks

How it works:

AdWords sets your bids for you to get as many clicks as possible. We don’t generally recommend this strategy in most cases, unless for some reason traffic is the primary goal for your campaigns.

When to use it:

Remarketing and brand campaigns are the only use cases that come to mind, but it isn’t standard practice. It could potentially give you lower CPCs for those two types of campaigns, but there isn’t a lot of data available on whether that’s generally true or not, so it’s something you will want to test. In general, there is a decent case to be made for using this strategy for remarketing and brand because you want to get as many clicks from those two campaigns as possible (since they are lower CPC than non-brand).

Maximize Conversions

How it works:

AdWords uses “auction-time bidding” to adjust your bids for each individual as opposed to in aggregate. By doing so, the goal is to get you as many conversions as possible within your daily budget. (Source: PPC Hero)

When to use it:

This strategy is best used in a non-brand campaign with a big budget (think at least $200-$300/day). The key here is having enough conversion data in order to try it. The lowest recommended number is 60 conversions in the last 30 days. That will give you a medium learning period with medium fluctuation in CPA. 100 or more conversions in the last 30 days is ideal, with low fluctuation and a short learning period.

AdWords Learning

Enhanced CPC

How it works:

With this strategy, you manually set a max CPC while allowing AdWords to override it if there’s a higher chance that an individual auction may lead to a conversion.

When to use it:

Enhanced CPC is a good step up from Manual CPC for advertisers that want to get started with an automated bid strategy while still maintaining some level of control. You don’t need large amounts of data like with Maximize Conversions, so small and mid-size advertisers can safely leverage this strategy across any type of campaign.

Manual CPC

How it works:

This is the simplest bid strategy: you set each keyword’s bid yourself. The only way it changes is if you manually adjust it.

When to use it:

If you have a lot of time on your hands, or simply want to have complete control over your bids, this strategy can make sense. Typically it is a safe bet for brand and remarketing campaigns, and even starting out on non-brand campaigns to get a sense for what the cost per click looks like. Google has continued to slowly transition advertisers away from manual control and towards automated strategies, so this option may not be around forever.