When AdWords first launched in 2000, manual and automated bidding were the only options. To succeed in paid search, you really had to know how to bid. You would manually set keyword bids and apply performance filters for each (manual bidding) or run scripts that defined specific criteria and adjusted bids automatically based on those criteria (automated bidding). For example, you would manually increase a bid on a keyword that you see performing well or use a script that would increase bids by Y% if your keyword position dropped by X%.
Source: Google. The evolution of PPC: from manual bidding to Smart Bidding
As you can imagine, most optimizations take a lot of time and labor -- and not too much strategic thought. It is tedious and repetitive work. So it comes as no surprise that Google took all that data they had been collecting over the years and applied the knowledge to an algorithm that could do all that monitoring and optimizing on its own. Unlike automations, where you apply keywords bids and optimizations across all users uniformly, Google now uses this knowledge to figure out how to bid for each single search query -- the most precise, granular level you can get.
In this article, we'll look at how PPC advertisers can use Google Smart Bidding to improve their campaign performance.
AdWords Smart Bidding: automated bid strategies powered by machine learning
Smart Bidding algorithm optimizes ads for your specific goals automatically. When you create an AdWords campaign, you can select one of the Smart Bidding strategies based on your goals and let the algorithm run your ads while you sit back and watch Google optimize each and every auction in real time — what Google calls “auction-time bidding.”
Choose your goal and let Google's Smart Bidding do all the work
While you can’t control how exactly the algorithm will manage your bid, you can direct the end goal, such as to pay a certain amount for each conversion or get as many conversions as possible -- within your budget range. Google AdWords offers advertisers the following four bidding strategies:
- Target CPA (cost-per-acquisition)
Caps your cost per acquisition while maximizing conversions. - Target ROAS (return-on-ad-spend)
Targets your ideal return on ad spend, which is basically how much money you’d like to get for each dollar you spend on ads, calculated as follows:
Conversion value + ad spend x 100% - Maximize Conversions
Works best for advertisers who don’t want to cap cost-per-acquisition and just spend the entire budget while getting as many conversions as possible. - ECPC (enhanced cost-per-click)
Combines manual bidding with Smart Bidding to raise or lower your manual bids based on whether the algo thinks the conversion is likely to happen.
Note: Historically, the manual bids have been restricted by the max CPC and could only be increased a bid 30% above that number. That has changed: the bid cap was fully removed last year.
You can use Smart Bidding to complement your current PPC strategy and use a third-party PPC tool for bulk edits and reporting across networks.
3 reasons to choose Smart Bidding over automated or manual bidding
1. Capture unique user context
Imagine a shopper searching on Google for new shoes. Which ad would she click, if any? Here’re a few things we want to know first.
- Is she searching for shoes on a desktop computer at home or from a smartphone on the go?
- Where is she based? If she’s based in San Francisco Bay Area, which part? (E.g., if the store has a physical location in Oakland or San Mateo, it may be easier for Alice to return the shoes in case they don’t fit).
- What time is it now? Is she searching on a work day or on the weekend? Morning or night?
- Has she browsed any specific shoes on your store’s website before? (i.e., is Alice on your RLSA -- remarketing list for search ads?)
- Is she searching for leather shoes, Kate Spade shoes, or party shoes?
- Which language is set in default settings for her Google account?
- Safari, Firefox, or Chrome? Where is the query coming from?
- If she randomly sees your ad on a search network partner’s website (vs. in search results), what kind of website? Is it an e-commerce website (highly relevant) or a news website (impulse buy?)
Source: Google
If you know all these things about her, you’ll have a better shot at capturing her attention. If you only define a couple of search signals when you set up your campaign, you’re losing money: most impressions won’t convert into clicks. Yet optimizing for each user’s unique search context simply doesn’t scale.
Predictive signals used by AdWords Smart Bidding include device, location, time of day, RLSA, ad creative, interface language, browser, operating system, and placement type to optimize for anyone who types a search query in Google, considering their unique context and finding the right “micro-moment.”
2. Simplify workflow
Every year Google AdWords keeps layering new features and tweaks on top of the existing ones. Since the AdWords launch, Google has added separate bidding for its content network, quality score, tablet retargeting, sitelinks, clicks-to-call and clicks-to-message, shopping campaigns, ad customizers, customer match, extensions, Gmail ads, PLAs, RLSA, DFSA, ETAs, and more.
"Yes, you might be able to squeeze out a couple extra conversions by being more in-control and constantly doing manual bidding," said Natalie Barreda, Director of Paid Search at Point It, a digital marketing agency. "But truly that’s not the best use of your time."
3. Focus on adding more value
In earlier days, bidding was central to advertising on AdWords, making the PPC advertiser slave to the ever-changing tweaks and add-ons of the algorithm. If Smart Bidding indeed evolves to automate itself to make the best bets, in a Deep-Blue-vs.-Kasparov style, that shift will open up opportunities for a whole new gameplay, in which advertising will be more about empathy (with strategic targeting) and creativity (with thoughtful copy and design).
In a nutshell, if you were to bid on an ad for the online shoe-shopper Alice using manual bidding or automation vs. Smart Bidding, you’d miss out on capturing granular contextual signals, and probably spend too much time figuring out which filters to apply to your campaign.
When you shouldn’t use Smart Bidding
Smart Bidding is just a tool in your PPC toolbox -- it won’t as if by magic bring you leads and increase ROI. As with any other tool, you’ll need to figure out when to use it and when to choose a different tool. Here’re example situations of when NOT to use Smart Bidding:
1. When you’re just getting started with a new campaign
If you’re running campaigns with little historical data, you might want to check how it performs with a manual/automated test run first.
2. If none of the four Smart Bidding goals fit your scenario
Dan Gilbert of Brainlabs recommends using other automation when your marketing goals don’t align with Smart Bidding strategies, such as if you want to drive more traffic to your website with generic keywords.
3. For short-term campaigns or your top-performing campaigns
If you’re running a short-term campaign (such as for a flash sale) or your current campaign numbers are totally off the charts, stick with your trusty automation.
Summary
Search advertising is, perhaps, the best playground for machine learning. With so many contextual signals Google offers to make ads relevant, using PPC automation and Smart Bidding makes sense for several reasons. For starters, Smart Bidding helps advertisers get a better shot at understanding user intent for each specific query. It also frees up time for things that are really, really hard to automate -- like strategy and creativity.