The Selection of the Bidding Strategy on Google Ads - the Key to the Efficiency of Your Campaign

1. What are bids and bidding strategies in Google ads?
2. What are possible campaign destinations?
3. What are manual bidding strategies?
4. What are automated bidding strategies?
5. What are smart bidding strategies?
6. When should, which bidding strategy be used in Google Ads?
7. What you should still know about bidding strategies in Google Ads

The digital age brings great advantages for advertisers. Finally, the success of advertising is measurable and the price is therefore calculable. How many people actually see and pay attention to the own advertisement is no longer a secret, but can be precisely captured by advertising platforms like Google Ad Manager . Ad serving in Search Engine Advertising can therefore be perfectly tailored to your campaign goal. For this to succeed, the right bidding strategy is needed. It decides when and to whom your ad is shown. In the following article, you will learn what bids and bidding strategies actually are and which ones are suitable for your campaign. In addition, you will receive answers to the most frequently asked questions in the context of bidding strategies in Q & A. 

What are bids and bidding strategies in Google ads?

If you want to place ads in Google Ads , placements must be purchased via Google Ads bid. Depending on the campaign format and bidding strategy, you pay for the impression, click or conversion in Google Ads. The bid sets the amount you are willing to pay at most. How high the actual bid turns out depends on the competitors. Because Google awards placements within the framework of auctions. This means that several advertisers bid for an advertising placement. The actual amount to be paid is therefore often lower than the maximum bid amount you manually set. You only pay the amount that is necessary to achieve a better ad rank than your competitors directly below you. On the other hand, the (partly) automatically determined bids for the own Google ads ads are based on the probability of a click or a conversion for each search query. Using Google AI or machine learning, Google can find out what the ideal bid would be and optimize campaigns accordingly.

To determine the appropriate bid with maximum ad success, there are different Google Ads bidding strategies. Basically, three different categories can be recognized: manual, automated and smart bidding strategies. The smarter, the less control of the bids remains with the advertiser.

Figure 1: Overview of bidding strategies ©ad agents

In order to reach for the right strategy for your campaign, the first step is to determine what should be achieved with the campaign.

What are possible campaign destinations?

Generally, the following campaign targets can be distinguished.

1. Clicks - You want as many hits on your website as possible.
2. Impressions - You want to increase your awareness and be seen as often as possible.
3. Conversions/Sales - You want the user on your website to perform a specific action. Be it the purchase or download of a product or software. Conversion-based campaign goals also include revenue generation.
4. CPM/CPV bids - You want to increase the views with a video ad. So it's about who actually watches your video

Once you have defined the campaign goal, it's time to select the appropriate bidding strategy. 

What are manual bidding strategies?

In search campaigns, a manual bid is understood as the manual setting of maximum Costs per Click. This allows you to make different bids for each campaign/ad group/keyword/placement. You alone determine how much a click on your ad is worth to you. The advantage: You really only pay if a user clicks on your ad - regardless of how many people the ad was delivered to in total. If you select "manual bidding strategy" in the Google Ads Console, a standard CPC will be suggested to you in the first step, which you can then adjust accordingly. To find out what a reasonable maximum CPC is for you and your company, you should include the value of a sale. For example, the sale of a watch for 500 € is worth more than the sale of a watch battery for 5 €. Accordingly, the CPC for the respective ads should also be different. Continuously observing the number of clicks after the setting allows you to optimize the amount further afterwards. In addition, you can make bid adjustments by increasing or decreasing your bids for search queries on mobile devices or for a certain keyword combination.

The manual CPC strategy can be extended by the so-called auto-optimized CPC (short: eCPC) into a partially automated Smart Bidding bidding strategy. Here, Google automatically adjusts the set maximum CPC bid for each possible ad delivery to the probability of a click or a conversion. The bid is then based not only on the competitors, but components such as the device, location, time of day and operating system and thus the context of the respective search query are included - although to a slightly lesser extent than with other Smart Bidding strategies. Thus, unlike Smart Bidding, you as an advertiser retain control over your bids. The eCPC for conversion optimization is available to you for search, display and hotel campaigns. For use, conversion tracking must be set up in advance.

For video ads, Google provides the CPV strategy (Cost per view). You only pay for a video call or click on the call-to-action overlay. Also clicks on info cards or companion banners are billed using CPV strategy. You only have to manually input the maximum CPV amount when setting up the campaign.

What are automated bidding strategies?

Automated bids are best if you want to maximize your clicks/impressions. With automated bidding strategies, Google automatically determines the bids depending on how likely the desired action is per ad delivery. In contrast to manual CPC strategies, no own bids for keywords or similar are needed here. It is enough that you only set the average daily budget per campaign. Google automatically manages the bids via the Google Ads system, so that the maximum click quantity or the percentage of desired impressions - in the search network or at certain ad positions - is achieved with the set budget. To ensure that the budget is spent as desired, you can set a maximum amount that you are willing to pay for an ad - unlike Smart Bidding.

For display & video campaigns, there is also the target CPM strategy. Here, the bids are fixed to a set Cost per Mill value, you pay for impressions. This is primarily worthwhile when you want to run awareness-oriented campaigns. In addition, simple CPM or vCPM strategies can be set up for YouTube or the display network, where payment is made for the number of impressions in the relevant networks. Every ad delivery counts as an impression. The vCPM strategy extends the bidding process to a maximum amount per 1,000 visible ad impressions in the Google Display Network.

What are smart bidding strategies?

Taking another step further in terms of automation and thus relying on the largest amount of data, smart bidding strategies, also called Smart Bidding. Smart Bidding strategies are conversion or value-based automatic bidding strategies that set an individual bid for each auction, measured by the probability of achieving the campaign goal. The Google algorithm takes into account various data that are processed in the background. These could be, for example, the time of day, the device, location, browser or operating system of the user who is making the search query. Each individual search query is evaluated by Google and classified in terms of its usefulness for achieving your campaign goals. Therefore, the smart bids are also submitted in real time. Thanks to the Google AI system, automatic bidding strategies learn over time and are thus able to optimize themselves to achieve even better campaign results. The more (conversion) data the campaign has available over a longer period of time, the better and more Google can learn thanks to machine learning. The following Smart Bidding strategies are available in Google Ads:

• Target CPA (Cost per Action) - Here, the bid is automatically adjusted so that as many conversions as possible are achieved at a fixed maximum price per conversion.
• Target ROAS (Return on Advertising Spend) - Here, the optimization/maximization of the conversion value is in focus. At the same time, the bids are optimized so that a ROAS value set by the account manager is achieved.
• Maximize conversions - Here, Google tries to maximize the number of conversions. There is no set CPA or ROAS value to consider. Google spends the entire set campaign budget to achieve as many conversions as possible.
• Maximize conversion value - Analogously to the Maximize Conversions strategy, the entire budget is invested per optimized AI bids so that the conversion value is maximized without regard to CPA or ROAS value.

A maximum amount or similar cannot be set with Smart Bidding as opposed to automated strategies such as the Max Clicks strategy. Google alone decides how high the bid turns out and how the budget is spent. If you want to know more about smart campaigns in Google Ads you will find it here.

When should, which bidding strategy be used in Google Ads?

Figure 2: Objectives of Bidding Strategies ©ad agents

Which of the mentioned bidding strategies you choose mainly depends on the established campaign goal. The strategy is determined according to whether the focus is on impressions, clicks or conversions.

CPM-based bidding strategies or the targeted proportion of possible impressions are recommended for reach-based campaigns. This means either the manual or automated bidding strategy. In the case of automation, Google optimizes the bids with a focus on visibility so that the maximum number of users is reached.

CPC-based bidding strategies such as manual (e)CPC bidding or the automated bidding strategy (maximize clicks) are recommended for campaigns focusing on clicks. The challenge of controlling your campaign is both a blessing and a curse for the manual variant. It can be ideal for small businesses with a manageable product and campaign selection. Because in this case the strategy offers the chance to reduce scatter loss. Beginners often struggle with setting bids manually, which is why one of the automated bidding strategies may be more suitable for getting started.

Conversion- or value-based corporate & campaign goals are best achieved with Smart Bidding campaigns. For example, the Target CPA makes sense if you want to reach the maximum number of conversions at a maximum cost per conversion. The only disadvantage is the lack of control over the bid amount. As a result, your budget may be used up significantly faster than you planned.

Whichever bidding strategy you choose, remember: Do not jump to conclusions, but have patience. The efficiency of a bidding strategy can be assessed at the earliest after 4-6 weeks.

What you should still know about bidding strategies in Google Ads

In the following Q&A we will answer the most frequently asked questions that are asked in the context of Google Ads bidding strategies.

Can you also change the bidding strategy of a campaign?

Perhaps you realise that you have chosen the wrong bidding strategy? No problem. Bidding strategies can be changed at any time at campaign level in Google Ads. Switching from a manual to an automated strategy is also no problem. The only thing you should keep in mind is the 7-day learning phase, which starts with the launch of an automated bidding strategy in Google Ads. During this time, the Google Ads algorithm has to adapt to the new bid settings and does not guarantee maximally optimized results.

What happens if you configure bidding strategies incorrectly?

If a bidding strategy is incorrectly configured, the company and campaign targets are not fully achieved, valuable impressions/clicks/conversions are missed or unnecessary too much is paid for an ad click or the main interaction of the bidding strategy. Depending on the selected bidding strategy, Google reports a wrong configuration to the user proactively.

For multiple campaigns with a common budget, for example, Google Ads shows an error message for incorrectly configured bidding strategies, as different bidding strategies (e.g. Maximize Clicks and Maximize Conversions) are probably stored simultaneously in the campaigns. Then the Google algorithm cannot optimize efficiently. Google shows an incorrect configuration as an error for smart bidding strategies, if the correct conversion actions are not selected as optimization target for the Google AI. This leads to a decrease in the accuracy of automatic bids through Smart Bidding, as the conversion history for all bids is taken into account.

What are typical errors in Google Ads bidding strategies?

Typical errors are mostly - besides the choice of the wrong strategy for the given campaign goal - in the set-up of the associated campaign, which ultimately leads to the inactivity of the bidding strategy in most cases.

One of the most common reasons for this is the pausing of campaigns. This can occur for different reasons. On the one hand, it could be that all ads or keywords within a campaign are paused, which is why Google cannot make bids. On the other hand, it could be that your budget is used up prematurely if keywords with broadly matching match types are stored, or the bidding strategies are provided with too aggressive bids. Another possible cause for your campaign's inactivity is incorrect configuration of conversion data, causing Smart Bidding to work inefficiently. Also a common mistake is forgetting or ignoring learning phases with bidding strategies. Here, premature conclusions are often drawn. You should make first valid statements about functionality and efficiency of a bidding strategy at the earliest after 4 to 6 weeks. Other typical mistakes are too high or too low deposited KPIs like a too low max. CPC with maximising clicks or CPA- or ROAS-maximum values are not deposited efficiently enough by the user, which can lead to considerable conversion losses.

Which tools can be used to monitor the bidding strategies?

To make sure your campaigns run smoothly, there are various Google Ads Bidding Tools. There is, for example, the "First Page Bid Estimate". This makes suggestions for you, especially for manual CPC bids, to ensure that you set the most efficient bids and your ad is served on the first search results page in an auction.

Secondly, there is the Google Ads Keyword Planner. Using a forecast, you can extract price ranges for various keywords. This gives you an overview of expected CPC bids and prices.

The most valuable Google Ads tool for (smart) bidding strategies is the bid simulator (Bid Simulator for Google Ads). This helps you to see the potential performance at different bids. Depending on the set bidding strategy, the ROAS goal, CPA goal etc. can be scaled. The simulator always uses the data of the auctions of the past 7 days to show what effect the higher or lower KPI target would have had. It also assumes that all other settings of the campaign and bidding strategy would have remained the same. With this tool, you have the opportunity to see how a changed target would affect the performance of the campaign.