Smart Bidding is a subset of Google’s automated bid strategy that helps advertisers optimize their conversion rates. Using machine learning, Google considers contextual data and historical search behavior to predict the likelihood of a conversion. When it believes a conversion is more likely, it increases the client’s bid automatically.
Understanding smart bidding
Smart bidding is a machine learning feature in Google Ads that is used to automate the bidding process and optimize conversions.
Within smart bidding itself are five different strategies:
Target ROAS
Bids are optimized to achieve an advertiser’s target return on ad spend (ROAS).
This strategy enables Google to predict future conversions and determine a CPA that maximizes ROAS and conversion rate.
Target CPA
In this case, bids are optimized to control the amount the advertiser pays for each conversion.
This is known as target cost-per-action (CPA) and seeks to avoid a scenario where the business pays for unprofitable clicks.
Maximize conversions
Bids are optimized to maximize conversions with respect to an advertiser’s budget.
This is a good option for smaller accounts since it only requires five conversions per month.
Target impression share
This strategy involves setting a bid to show an ad at the top of the page or first in the carousel as frequently as possible.
This drives more volume to a site but does not guarantee that all traffic has purchase intent.
Enhanced CPC
Which seeks to increase conversions by optimizing the maximum CPC.
This strategy is used in combination with manual bidding to increase conversions while retaining more control.
The four key benefits of smart bidding
According to Google, there are four key benefits of smart bidding:
Diverse contextual signals
Businesses can factor in a broad range of signals into their bid optimization.
These are identifiable attributes about a person or their contexts such as device, physical location, language preference, time of day, and location intent, among others.
Advanced machine learning
Algorithms consider vast amounts of data to better predict how different bid prices impact conversions or indeed conversion value.
Flexible performance controls
Smart bidding is a tailored solution that enables the business to set performance targets relevant to its objectives.
Targets can be set based on the desired attribution model and can also be device-specific.
Transparent reporting
Google offers various reporting tools and features that allow the business to pinpoint any issues and troubleshoot rapidly.
Simulators, for example, predict how ads may have performed if different targets or budgets were set.
There is also an experimentation feature that clarifies how smart bidding performs when compared to the current bidding method.
Pros and cons of smart bidding
Smart bidding has the obvious advantage of reducing the time and hassle associated with manual bidding.
It is more of a set-and-forget solution where an algorithm does the bidding work on the business’s behalf.
Google’s access to vast amounts of information also makes smart bidding an ideal solution for small or new businesses that lack historical campaign data.
However, one drawback of the passive aspect of smart bidding is the relative absence of visibility and control over how data is used to optimize campaigns.
Advertisers who attempt to craft a strategy that increases conversions may find this lack of access frustrating.
Google’s extensive store of data can also be seen as a negative when one considers that larger audiences tend to be less targeted.
This has the potential to dilute ROAS and decrease conversion rates.
Key takeaways
- Smart bidding is a machine learning feature in Google Ads that is used to automate the bidding process and optimize conversions.
- Within smart bidding itself are five strategies: Target ROAS, Target CPA, Maximize conversions, Target impression share, and Enhanced CPC.
- Smart bidding is a more passive approach to advertising that has access to vast amounts of user data. However, both these positives could also be interpreted as negatives in certain contexts or for certain businesses.
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Marketing Glossary
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Ambush Marketing
As the name suggests, ambush marketing raises awareness for brands at events in a covert and unexpected fashion. Ambush marketing takes many forms, one common element, the brand advertising their products or services has not paid for the right to do so. Thus, the business doing the ambushing attempts to capitalize on the efforts made by the business sponsoring the event.
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Brand Equity
The brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.
Brand Positioning
Brand positioning is about creating a mental real estate in the mind of the target market. If successful, brand positioning allows a business to gain a competitive advantage. And it also works as a switching cost in favor of the brand. Consumers recognizing a brand might be less prone to switch to another brand.
Business Storytelling
Business storytelling is a critical part of developing a business model. Indeed, the way you frame the story of your organization will influence its brand in the long-term. That’s because your brand story is tied to your brand identity, and it enables people to identify with a company.
Content Marketing
Content marketing is one of the most powerful commercial activities which focuses on leveraging content production (text, audio, video, or other formats) to attract a targeted audience. Content marketing focuses on building a strong brand, but also to convert part of that targeted audience into potential customers.
Digital Marketing
A digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.
Growth Marketing
Growth marketing is a process of rapid experimentation, which in a way has to be “scientific” by keeping in mind that it is used by startups to grow, quickly. Thus, the “scientific” here is not meant in the academic sense. Growth marketing is expected to unlock growth, quickly and with an often limited budget.
Guerrilla Marketing
Guerrilla marketing is an advertising strategy that seeks to utilize low-cost and sometimes unconventional tactics that are high impact. First coined by Jay Conrad Levinson in his 1984 book of the same title, guerrilla marketing works best on existing customers who are familiar with a brand or product and its particular characteristics.
Inbound Marketing
Inbound marketing is a marketing strategy designed to attract customers to a brand with content and experiences that they derive value from. Inbound marketing utilizes blogs, events, SEO, and social media to create brand awareness and attract targeted consumers. By attracting or “drawing in” a targeted audience, inbound marketing differs from outbound marketing which actively pushes a brand onto consumers who may have no interest in what is being offered.
Integrated Marketing
Integrated marketing describes the process of delivering consistent and relevant content to a target audience across all marketing channels. It is a cohesive, unified, and immersive marketing strategy that is cost-effective and relies on brand identity and storytelling to amplify the brand to a wider and wider audience.
Marketing Mix
The marketing mix is a term to describe the multi-faceted approach to a complete and effective marketing plan. Traditionally, this plan included the four Ps of marketing: price, product, promotion, and place. But the exact makeup of a marketing mix has undergone various changes in response to new technologies and ways of thinking. Additions to the four Ps include physical evidence, people, process, and even politics.
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