Back when I first started learning pay per click (PPC), there was only one bidding option for what was then called Google Adwords, manual cost per click (CPC). That was it. It certainly made the decision on which method to use simple. While the decision was simple, the method wasn’t. Sure you could use a simple formula: CPC * (how many clicks it takes to get a conversion) = your Target CPA. I always tended to bid by feel and still do in manual CPC campaigns too this day. Mostly because I always want to pay the lowest cost per click possible.
Back then int was much more simple. Bid one penny more than your competitor and show up above them. There were even tools you could get that figured out what your competitors were bidding. You could use an automated bid management tool that would use that data to get the position you wanted. Then came quality score changing the bidding landscape on Google Ads to this day. The new formula became (max CPC * Quality Score) = Ad rank. The ad rank among your competitors is what determines your position on the search results page.
According to Google:
Your max. CPC bid is the most you'll be charged for a click, but you'll often be charged less - sometimes much less. That final amount you're charged for a click is called the actual CPC.
Actual CPC is often less than max. CPC because with the Google Ads auction, the most you'll pay is what's minimally required to hold your ad position and any extensions shown with your ad, such as sitelinks. For example, if your Ad Rank places you immediately above search results (Ex: in the fourth position) with location extensions and sitelinks, you’ll pay the minimum amount necessary to keep that position -- and meet the relevant thresholds tied to that position -- with those extensions.
Very rarely do you actually pay your maximum cost per click, but you’re telling Google that’s the most you’re willing to pay. The difference between your average CPC and maximum CPC is called headroom. Here’s an insiders tip: it’s a good idea to have your headroom be as low as possible. This will typically reduce your average cost per click from what we’ve seen over the years.
Manual CPC bidding is a bit of a lost art in today’s PPC landscape. Personally, it’s been by far the hardest thing to train anyone in PPC on doing. Most PPC managers that excel at it have been doing PPC management before there were any automated solutions to bidding.
When Should You Use Manual CPC bidding?
Manual CPC bidding is available for search, shopping & display campaigns. If you ask Google, they’ll likely tell you NEVER. In fact, when you change your bidding settings in the interface it actually says this:
Now don’t get me wrong. This is a 100% accurate statement, but so is Setting bids manually (when done properly) may result in higher performance. Trust me when I say, don’t believe everything Google has to say. They have a way of almost forcing you to do what they believe is the right way. Since their entire business model is based on making money, that alone should at least make you question the recommendation.
The truth is there’s no exact science to this. For any given advertiser, campaign, ad group & keyword the results may differ. Personally, I start nearly every new campaign on manual bidding to create a baseline. When I have that baseline I start testing other bidding options. There is most likely many that feel the complete opposite and there’s nothing wrong with that.
Enhanced CPC is a box you can check along with manual CPC bidding. It’s not applicable to any other bidding type. For Google, this was the beginning of any automated bidding. Here’s what it looks like:
Enhanced CPC uses manual bidding with a smart bidding layer on top of it. According to Google:
This strategy raises your manual bids in situations that seem more likely to lead to a sale or other conversion on your website, and lowers your bid for situations that seem less likely to lead to a conversion.
The major difference to keep in mind when using enhanced CPC is that Google can raise your bid above your maximum cost per click if they believe it to be more likely to convert. Again, you’ll see various answers on the results from this. From what I’ve seen most PPC managers have had good results with this and tend to use it. I know many that feel the opposite though. What’s the answer? Test.
There are a variety of bidding options across different campaign types that use smart bidding. While Google recommends Smart Bidding in virtually any case it’s not always the ideal solution. Even when you decide to implement or test smart bidding, there are a variety of choices and depending on the advertiser one might work better than another.
There are many reasons why Smart Bidding has an advantage over manual bidding, but that doesn’t always mean it performs better. If you’re using manual CPC bidding you have the ability to adjust bids based on the following: time of day, day of week, device, audience, location & demographic. In the Google Ads interface we have access to see the performance on each of those data points and choose to bid up, down or exclude.
However, Smart Bidding has those plus additional factors: location intent, ad characteristics, interface language, browser, operating system, actual search query, and depending on the type of campaign you’re running a few others. Even if we had access to every one of those options with manual bidding, it can get far too complex to manage. This is where artificial intelligence comes in. When a search is completed on Google, artificial intelligence will look at all of those factors and decide what your optimal bid should be. This is done every single time a search is made.
While that all seems amazing, one of the challenges artificial intelligence is up against is it relies on the data coming into the algorithm. A good rule of thumb is the more data you’re feeding it, the better it can determine your bid. Now the opposite can also be true. The less data your feeding it, the harder time it has determining your optimal bid. Even Google recommends at least 30 conversions over a month or longer to let the algorithm learn. What happens if you don’t do that much volume in a month? The algorithm still tries to determine your bid, but the likelihood of accuracy can go down.
Does this mean that if you don’t get 30 conversions within a month you should always use manual bidding? Although a good rule of thumb, not exactly. In fact we have two cases just within the last 30 days where we tested Smart Bidding on low volume campaigns and in both cases the results beat our manual bidding. In both cases we went out on a limb with this test.
Here’s one example:
This one has an almost identical cost per conversion and we’ll continue to run this experiment until we have statistically significant results. What’s most interesting here is when you look at the cost per click and conversion rate. Both are nearly double. When they algorithm used all the factors is had for certain keyword searches, it determined a bid significantly higher than our bid would have a high conversion rate. They were right.
I have plenty of examples of the opposite on either low or high volume campaigns, but what impresses me the most on these is how good the smart bidding is doing on such low volume. Does this mean we switched all our low volume campaigns to smart bidding? Nope. However, we are now going to run more similar tests for lower budget clients.
Now we’ll get into the different types of smart bidding.
This is likely your most common. With Target CPA you (the advertiser) determines the most you would like to pay for a conversion and the algorithm will try to match or beat your target CPA. Keep in mind this does not mean it will. It only means it will try.
Target CPA is a good starting point for many advertisers to test assuming your tracking conversions. It can work well for both lead generation and eCommerce. The best way to start testing this is a campaign that has historical performance data that will give you a baseline target CPA to start with. Typically you’ll want to start with the recommended Target CPA and let the algorithm learn. From there you can start to bring it down. However, Google does claim you can start a campaign from scratch with this bidding type and it will learn on the go.
Maximize conversions uses your budget to try and get you the most conversions while spending your full daily budget. This can be great for campaigns that are either hitting their daily budget or campaigns that aren’t hitting their daily budget, but you would like them to even if it means a higher CPA.
While target CPA focuses mostly on hitting your target CPA, maximize conversions focuses more on hitting your daily budget while getting you the most conversions.
We don’t use this one as much, but we do use it for most clients if the campaign consistently hits our daily budgets.
Target ROAS (Return on ad spend)
Target ROAS can be a great option for eCommerce clients. Often times with eCommerce, ROAS is far more important the your cost per purchase. This smart bidding type works virtually the same as Target CPA, but instead of focusing on your cost per conversion column, it focuses on your conversion value divided by cost (ROAS).
Maximize clicks just like it says, focuses on clicks. Mostly intended for branding advertisers who are looking for click volume ahead of any other metric, there are other use cases as well. Like maximize conversions, the algorithm will focus on spending your budget in full while getting you the most clicks.
A great case for using this bid type is if you aren’t tracking any conversions. Another way that we actually use quite often is when starting out a new campaign. Sometimes we’ll start out with maximize clicks because it may help speed up the process of getting clicks and spending our budget quickly. When we start out with manual CPC we are typically starting as low as possible and increasing bids until we get enough volume. Maximize clicks can help do that for us.
We highly recommend setting a manual bid cap when using this because it can increase your cost per click more than you’d like. While you should always keep a close eye when testing a new bid strategy, keep an extra close eye when testing maximize clicks.
Target Impression Share
Last, but not least target impression share. This is replacing target search page location as Google Ads is getting rid of average position anyway. The algorithm will set your bids with the goal of showing your ad on the absolute top of the page, on the top of the page, or anywhere on the page depending which option you choose.
Here’s what it looks like:
First you would choose where on the page you want to show and then you choose the percent impression share you would like in that location. You also can set a CPC bid cap.
This can be a great bidding type for any client focused on branding and also can be good to test for brand campaigns with sales or lead goals that want to own the search results for their brand.
Overwhelming isn’t it? That’s what we’re here for at RelayPM. We highly recommend using an agency to manage your Google Ads account for this very reason. We’ve run hundreds of campaigns using every single bidding option available. This allows us to know which is best for each client to start with. We always test other bidding types though, whether it’s manual CPC or any type of smart bidding.
So which bidding type is right for you? The answer is all of them or just one of them. The only way to figure that out is to test and then keep testing. We love that Smart Bidding allows us to take one thing off of our plate so we can focus on another piece of the pay per click puzzle, but it’s not always the most efficient type.