Bidding Wars: A Definitive Guide
Written By Brandon Mitchell, Sr. Paid Search Campaign Manager at MuteSix
Smart bidding is a resource that automates certain processes and uses machine learning to optimize ads for better conversion or a higher conversion value every time the bid-process occurs. This allows businesses to take a more hands-off approach with their search ads to focus on other important marketing efforts. In simplest terms,bidding strategies take the heavy lifting and guesswork out of setting bids to meet your performance goals.
When used properly, bidding strategies have the ability to transform the performance in your Google Ads account. Every bid strategy has its place in a digital marketer’s toolbox, so it’s important to know when to use each and how for optimal results.
If you’re confused which is right for your particular campaign or KPI needs, bookmark this cheat sheet of the six types every marketer should know and start leveraging today.
How Do Bids Work on Google?
Before we jump into the different bidding strategies, let’s first break down how bids work on the Google Ads platform.
Google Ads relies on an auction-based bidding system for every keyword. Every time you search for something on Google, the search engine conducts a real-time auction that involves every advertiser’s account with a keyword matching your search query. The auction uses four main factors to determine when and if an ad is shown.
1. Maximum Cost-Per-Click (CPC) Bid
This is the maximum amount you’re willing to pay for any given click. Costs for an individual keyword can vary based on a variety of factors, but each keyword generally has a “minimum” CPC that’s required regardless of the competition.
2. Ad Quality
Google will score ads based on historical data, ad relevance, ad extensions, and landing page experience. If an ad’s quality is low, you can expect to pay a higher CPC on average compared to a brand with higher ad quality.
3. Ad Rank
Every paid search ad must meet a specific threshold to be shown for a particular keyword. Thresholds are dynamically determined by ad quality, ad ranking, user context (i.e., location and device), search content (i.e., the keyword’s topic), and other related auctions from similar keywords.
4. Competitiveness
Similar to any auction, the more competitors there are, the more expensive keywords will be. For example, let’s assume we have three competitors with similar ad qualities and ranks bidding on a specific keyword. Competitors 1 and 2 must have a maximum bid of at least $0.01 higher than Competitor 3 to outrank Competitor 3. Similarly, Competitor 1 must have a higher maximum bid (by at least $0.01) than Competitor 2 to outrank them.
Because Google’s goal is to return the most relevant information based on search queries, all advertisers should aim to create ads that are most relevant to the keyword for which they’re showing. Those that do are then rewarded with a higher ad ranking and a lower CPC required to maintain that higher ad ranking position compared to another advertiser with less relevance. This is generally why brands find their branded keywords to be much cheaper than non-branded keywords that are still closely related to their brand.
Keyword bids and overall bidding strategies are integral to the success of your Google Ads account. As keywords become more competitive, it’s extremely important to choose the right strategy.
What Types of Bidding Strategies Are Available in Google?
Now that we know how bids work in Google, let’s take a look at the different bidding strategies.
1. Manual CPC
As one of the original bidding strategies in Google Ads, Manual CPC is the bidding strategy that puts you in 100% control of your spend—you control the maximum spend you’re willing to pay for each click.
How It Works
Manual CPC allows you to set the maximum bid you’re willing to pay in an auction for a particular keyword. This can be set on a keyword, ad group, or campaign level. Note that your Manual CPC bid and the actual CPC bid aren’t necessarily the same—your actual CPC may be much lower depending on how aggressive your CPC bids are.
Pros
1. Control: You have full control over how much you’re willing to spend down to the cent.
2. Low Barrier of Entry: Conversion tracking isn’t required to run this campaign.
Cons
1. More Time Required to Be Effective: As a non-automated strategy, you’ll need to spend more time manually reviewing bid modifiers across location, audience, time of day, and other relevant criteria. If not, you run the risk of missing valuable customers or wasting ad spend.
2. Lack of Relevant Data: Manual CPC does not have access to certain contextual signals that automation can leverage in real time.3. Relying on Historical Data: Optimizing with a Manual CPC strategy fully relies on historical data; therefore, you’ll tend to optimize for what’s already happened rather than what’s currently happening.
When to Use
Manual CPC should be considered when initially launching new campaigns as a way to collect a solid baseline on performance. It’s also optimal for campaigns that have high intent, as it prevents overpaying for keywords. It can additionally be effective for users who have goals that aren’t conversion based, such as brand awareness around a particular search term.
Example
Joseph has been running his new e-commerce business for a few months and is eager to start advertising with Google Ads. After reviewing past website performance, he understands that his website conversion rate is 1% and his AOV is $150. If he needs to generate at least $50 in revenue per sale to remain profitable, Joseph can assume that he can have a maximum CPC bid of $1 to meet his goals (since one out of every 100 visitors convert). Using a Manual CPC bidding strategy, he can learn how paid traffic interacts with his website.
2. Enhanced CPC
How It Works
eCPC functions similarly to Manual CPC; however, it allows Google to leverage contextual signals and historical data to increase or decrease your Max CPC for specific users and searches based on your conversion goals. While it can increase your Max CPC on individual searches, your actual CPC will generally remain at or below your Max CPC on average.
Pros
1. Offers full control over maximum CPC bids, but also allows Google to optimize for your conversions.
2. Will not only increase bids for users more likely to convert, but will also decrease bids for those less likely to convert.
Cons
1. Because eCPC can be limited by your set max CPC, you may still be missing valuable conversions if your bids are set too low.
2. Similar to Manual CPC, you’ll still need to spend more time reviewing bid modifiers to ensure you aren’t missing out on valuable customers or wasting spend.
Note, in certain cases, eCPC may increase bids beyond what’s profitable for your goals.
When to Use eCPC
eCPC is a great strategy to use for a new campaign within an account that has been running for some time. While it can still leverage learnings from the account, it also gives you the ability to create a solid baseline of performance.
Example
After running his campaigns for a few months, Joseph enjoys the control he has over his bids but wants to begin incorporating machine learning. By using Enhanced CPC, he can still maintain his profitability goals while also leveraging past conversion data to target new users who may be more likely to convert.
3. Maximize Conversions / Target Cost Per Action
Note, Google recently consolidated the tCPA bidding strategy into Maximize Conversions.
How it Works
Maximize conversions is an automated bidding strategy that allows Google to leverage real-time auction factors such as user intent, search history, website behaviors, and much more to decide whether or not to show your ad, and what the Max CPC should be to generate a conversion. Once a daily budget is set, Google will do everything it can to generate as many conversions as possible at that budget.
Within the Maximize Conversions strategy, there’s also an option to set a target cost per action or tCPA. This tells Google to optimize for getting conversions at or below that spend within the parameters of your set daily budget.
Pros
1. Allows your campaigns to leverage real-time information to adjust bids accordingly.
2. Requires less time to actively manage, compared to manual strategies.
3. Generates qualified consumers as efficiently as possible.
Cons
1. tCPA can occasionally inflate CPC metrics unnecessarily in certain instances.
2. Without tCPA goals, Maximize Conversions may have a tCPA that goes beyond profitability.
3. The Maximize Conversions strategy in particular will generally spend up to 1.5x of daily budget, and may overpay for bids in the process.
4. Historical data is required to be effective—generally at least 15 conversions in 30 days.
When to use MaxC / tCPA
MaxC / tCPA is an effective strategy for businesses that are looking to maximize profitability, particularly for those with products that have a similar price point (i.e., a store that sells new video games) or for businesses that have customers with longer Lifetime Values.
Example
Monica has been running campaigns in Google Ads for a few months and averages over 100 conversions in the account per month. While she’s been proactively using bid modifiers to target specific demographics, audiences and keywords that perform well, she wants to save time in the platform so she can focus on big-picture items such as new product launches. By using a MaxC / tCPA bidding strategies, Monica can leverage both past and real-time data to target people who are most likely to purchase her products.
4. Maximize Conversion Value / Target Return on Ad Spend
Note, Google recently consolidated the tROAS bidding strategy into Maximize Conversion Value.
How it Works
Similar to MaxC, MaxCV allows Google to focus on generating the highest conversion value possible. Similar to tCPA, you can also set a target ROAS goal, which tells Google to aim for the specified rate of return.
[ Note: Pros & Cons are similar to those of MaxC / tCPA ]
When to Use MCV / tROAS
Monica has been running campaigns in Google Ads for a few months and averages over 100 conversions in the account per month. While she’s been proactively using bid modifiers to target specific demographics, audiences and keywords that perform well, she wants to save time in the platform so she can focus on big-picture items such as new product launches. By using a MaxC / tCPA bidding strategies, Monica can leverage both past and real-time data to target people who are most likely to purchase her products.
Example
Using the previous example, Monica decides to launch a new product that is significantly more expensive than her previous products, so her customer acquisition cost is now much higher for that product specifically. Because she’s interested in selling both products, Monica decides to use a tROAS bidding strategy to maintain profitability while leveraging Google’s machine learning.
5. Target Impression Share
tISH allows you to occupy a keyword at a specific percentage. Let’s say your goal is to occupy a specific keyword to generate more brand awareness. tISH allows you to set a target impression share anywhere from 0 – 100% in order for you to accomplish that goal.
Pros
1. Great for brand awareness and occupying space on the SERP.
2. An easy-to-use approach compared to manually setting bids.
Cons
1. Because Impression Share doesn’t always translate to goals outside of brand awareness, tISH can be irrelevant to most business goals.
2. 100% impression share can sometimes be cost prohibitive.
3. This bidding strategy has the ability to raise CPCs significantly to achieve a specific impression share if Max CPCs aren’t set.
4. No control over traffic quality.
When to use tISH
This strategy is effective for achieving brand visibility and generating new product awareness around specific keywords, however it is generally recommended that other conversion-based (i.e. email signups, purchases time on site, clicking a certain CTA) strategies are used to drive relevant traffic.
Example
Theo is launching a new audio streaming service and wants to increase his brand’s visibility by showing ads on his competitor’s search terms. By using tISH, Theo can make sure that his bids are automatically being adjusted to deliver maximum visibility at whatever percentage he’d like.
6. Maximize Clicks
How It Works
Maximize Clicks allows Google to focus on generating the most clicks at a given daily budget. Like the other automated strategies, maximizing clicks leverages contextual signals and historical data to increase or decrease your Max CPC, but does so based on the probability of a searcher clicking your ad.
Pros
1. An easy-to-use approach to generate as much traffic as possible.
2. Conversion tracking isn’t required to run this campaign.
Cons
1. This bidding strategy has the ability to raise CPCs significantly to receive clicks if Max CPCs aren’t set.
2. No control over traffic quality.
When to Use MaxClicks
The Maximize Clicks strategy is ideal for businesses who aren’t able to create conversion actions but still wish to use Google’s automated strategies to capture users who are most likely to click (and likely take a specific action).
Example
Stephanie just started her blog and is looking to drive as much traffic to it as possible to boost readership. By using the Max Clicks bidding strategy, Stephanie can drive as many clicks as possible in a short amount of time.
Letting the Bidding Begin: Not Sure Where to Start?
Smart bidding is a resource that automates processes and uses machine learning to optimize ads for better conversion or for a higher conversion value every time the bid-process occurs. This allows businesses to take a more hands-off approach with their search ads to focus on other marketing efforts.
In order to get the most out of your Smart Bidding strategy you’ll still need to be able to run and maintain your ads strategy and to also make sense of the results. For this, turn to the Google experts at MuteSix for a complimentary consultation to learn more about scoring the right bidding strategy to ultimately win the bidding wars and have your ads beat the competition.