Selecting the right bid strategy for your Google Ads campaigns will be key for achieving your advertising goals. However, understanding the different types of Google Ads bidding strategies, and when to choose which one, can be very confusing. Especially for beginners.
When I first started learning about Digital Marketing, I was a little bit intimidated by all the unknown terms that appeared in every single article. This can be very demotivating for everyone who is just starting out, and simply doesn’t understand a thing as it happened to me a while ago.
For this reason, I really wanted to write this article and explain the different Google Ads bidding strategies in a non-Marketing language.
So, let’s not waste more time!
What is a bidding strategy in Google Ads?
The first step to deciphering bidding strategies in Google is understanding what a bidding strategy is.
If I could put it into a single phrase, it would be something like this:
A bidding strategy is simply the way Google will administer your budget depending on your goals.
In other words, when you are setting a bidding strategy, you are saying to Google: “This is my goal with this campaign. Oh, and this is the maximum amount of money that I am willing to spend to achieve it. Now, do your thing!”
Later on, Google will use this information to display your ads in one way or another depending on the goal that you have selected.
The Hotel Manager example
To put it into perspective, let’s say that you just bought a chain of 10 hotels across different Spanish resorts.
You have a lot of other businesses, and you don’t have much experience in the hotel industry. So, you hire a hotel manager to do that for you.
However, you also hired him to do activities that will bring more tourists to your hotels. You give him 50 thousand dollars, and tell him “Here is my budget, do whatever is necessary, but make my hotels full this summer“.
You don’t know exactly what he is going to do, he has his techniques and methods. But you trust him that he will manage your hotels correctly, and attract more tourists without exceeding the budget.
In the world of advertising, Google is that hotel manager. You set a goal for your campaigns, give Google a budget, and leave it to its algorithms to do the right things for your budget.
There are different goals that you can have with an ad, for example:
- Is your goal to drive more traffic to your website?
- Do you want to make your visitors perform a specific action on your website? For example, filling out a form, downloading an ebook, or making them stay for more than 5 minutes.
- Maybe you aim your ads to appear on Google a minumum number of times?
- Or maybe, you don´t want to pay above a certain price for a single click.
In other words, bidding strategies on Google are the specific goals for your campaign for your budget.
How Google Ads bidding works
Now that we’ve seen the simplified definition of bidding strategies, it is time to deep dive a little bit more.
As I explain in detail in my article Search Engine Marketing for Beginners, Google uses a bidding system to decide which ads will appear first on the its results page. And then of course, there is a second place, a third, and so on.
Google decides the order of these ads in real time. In other words, when you type something like “flights to Sofia”, multiple companies that offer flights to Sofia will compete in the matter of milliseconds to show up first for your search result.
It works like bidding for an auction. In other words, companies will place their bids to try and position first among the search results.
However, if Google only placed first the companies with the biggest budget, companies with limited budgets would never had a chance to win a good position on the first page.
For this reason, Google uses 3 criteria to decide which ads should place before others:
- Maximum Bid – the maximum amount of money that you are willing to pay for a single click.
- Quality Score – how relevant Google considers your ad to be for that user.
- Extensions impact – extensions are additional snippets of information attached to your ad.
The advertising platform uses these 3 factors to calculate yours and your competitors’ ad rank. An ad rank is simply your position on Google’s pages for a specific search.
If you want to learn more about these concepts, you can check my article What is Google Ads Quality Score?
Back to the hotel example
So, in the context of Google Ads bidding strategies, what you need to understand is the following. Let’s go back to the hotel example, and say that a potential customer is looking a nice hotel in a beautiful Spanish resort.
- So, the user goes to Google and types “affordable hotels in Málaga“
- At this moment, the auction between your hotel chain and other competitors starts.
- In the matter of milliseconds, Google decides who will rank first, and who will rank second.
However, not every hotel chain will have the same goal. Of course, the end goal is always the same for every hotel – to have all hotel rooms full of people for the next season. What hotel wouldn’t want that?
The thing is, although the end goal is the same for everyone, the goal of this specific campaign may vary. Some hotels make ads on Google to gain brand visibility. Others, to drive more traffic to their website.
And others, to encourage their web visitors to send a request about available rooms for a certain date.
Google will use these campaign goals to decide what users will see your ad during a bidding. It takes into account the previous searches of the user, its overall history of searches, the exact term that he used, and other algorithm factors that we don’t know for sure.
So, Google uses its algorithms to calculate the likelihood of the user to perform a specific action. For example, let’s see the bidding strategy “Maximize clicks”. (We will see it in detail later).
If the goal of your campaign is for Google to get the most clicks for your ad and your budget, Google will prioritize showing your ad to users who are more likely to click than others.
What are the types of bidding strategies?
We already have a better understanding of how Google Ads bidding strategies work. Now, let’s see what are the different types of strategies that you can select from:
1. Target Cost per Acquisition (Target CPA)
If you are looking at this term not understanding a single thing, don’t worry. It’s more simple than it seems. Let’s start deciphering this strategy word by word.
In Google, an acquisition is simply a potential customer. In the Marketing world, a potential customer is also known as lead.
Now, you will probably think: There are a lot of people who pass through my website. How does Google count which web visitors are also potential customers?
There are different ways for Google to know that. You can read more about creating goals here. However, the most popular way that companies use to measure the number of potential customers is by creating a form on their website:
When a person fills out a form, two things happen:
- He is considered a potential customer because he is requesting more information about your product. Or has decided to start your free trial. Or has downloaded your ebook. Whatever your purpose with the form is, he showing an interest in a possible purchase at a later stage.
- Have you noticed that when you fill out a form, the website takes you to another page to thank you for filling out the form? The reason why companies take their users to a Thank you page is because they use it to implement a tiny piece of code from Google Ads and Google Analytics into it.
Image source: Ahdiya Grg
This code helps Google measure the number of potential customers – aka users who showed an intention of purchase. Or at least want to continue interacting with your business. These people are also called leads, conversions, or acquisitions.
So, if 10 people filled out your form to download your whitepaper, Google will see and count 10 potential customers for your business.
Now, going back to our Target CPA.
Having said all this, Target Cost Per Acquisition simply means that your goal is to acquire potential customers for a maximum cost per customer.
For example, if your hotel room is 100 EUR per night, it doesn’t make sense to spend more than 100 EUR to acquire a single potential customer through Google Ads. Well, of course this could make sense if this person stays for 5 or more days.
But generally, companies don’t want to spend more money on a lead (potential customer) than the benefit that they would get from him. So, if you spend 100 EUR to acquire a customer who is only going to stay 1 night in your hotel, you won’t get any profit from that.
For this reason, companies use Target CPA to set a maximum amount of money (Target Cost) to obtain a single lead. This way, they ensure that they are not spending more than they would be earning.
So, if your hotel room costs 100 EUR per night, you could set your Target CPA to 50 EUR.
Choosing this bidding strategy will make Google bid for your ads in a way that doesn’t exceed your maximum Cost per Acquisition. Some acquisitions (potential customers) will cost more than 50 EUR, others less, but in the end Google evens it out to stay within your limits.
To select this strategy, select a campaign, go to Settings, and choose Bidding – Target CPA:
And then, just set the maximum cost that you are willing to pay for a single potential customer.
2. Target Return on Ad Spend (ROAS)
The Target Return on Ad Spend is the second option on the drop-down list of Google Ads bidding strategies:
How does it work exactly? Well, it requires some math to figure it out.
Let’s say that you want to generate €5 for every €1 spent with your campaign. So, if your budget is €100 for this campaign, you are expecting to earn at least €500 of profits from it.
With this bidding strategy, Google will set your bids – the maximum cost that you are willing to pay for a click – to obtain the most leads possible based on the return that you are expecting from your ad budget.
In other words, Google will try to manage your money in a way that gets you the return of investment that you are expecting. While still capturing potential customers, of course.
The Target ROAS is measured in percentages. You can use the following formula to calculate it:
The sales that campaign generated ÷ how much you spent on it x 100%
So, with a practical example it will look something like that:
€500 in sales from your campaign ÷ €250 investment x 100% = 200%
If you are still confused about what percentage to set, you can get an idea from your previous campaigns.
Just follow these simple steps:
- Select your campaign;
- Go to the tab Keywords;
- Click on Columns:
Now, go to Conversions and check the box to add the metric Conversion value/cost:
And click on Apply to add it to your columns.
Now, you can use the result from your best performing campaigns to set as your new Target ROAS.
3. Manual CPC Bidding Strategy
One of the most popular Google Ads bidding strategies is Manual Cost per Click bidding. With this strategy, you have much more control over the cost of clicks than other options. What does that mean?
Well, it simply means that you are setting a maximum cost limit for your clicks. Let’s say that a person goes to Google search and types in “best hotels in Málaga”:
The moment he types that, many companies like yours are competing in real time to win the first positions on Google for their ads. Now, every company manages its own budget limitations and strategies.
And each one has a maximum price that it is willing to pay for a single click.
To simplify this example, let’s say that we only have three competitors for that keyword. Hotel A – you, Hotel B, and Hotel C, which are your competitors. Each one of you has set a different maximum cost:
- A – €3
- B – €2.5
- C – €5
Now, the moment a user makes his search, the bidding happens in real time in the matter of milliseconds. Of course, we already explained that the maximum amount that you are willing to pay for a click isn’t the only factor to determine the position of your ads on the first page.
But for this example, let’s assume that all three hotels have the exact same Quality Score and Extensions Impact, so the only variable that will move them up or down is the maximum bid.
In this case, because hotel C has the highest budget for this user’s click, the company will position in front of hotel A and hotel B. Because you have manually set your maximum bid to be €3, but someone else is willing to pay more, Google cannot exceed your limits.
However, you can still position in front of Hotel B which is willing to pay less than you for a single click. Of course, always keeping in mind that all other things are being equal in our simplified example. Which is rarely the case in the real world of bidding.
With this strategy, if your maximum CPC is €3, Google will always bid at €3. Not more, and not less. This doesn’t mean that you are always going to pay €3. The actual amount that you are going to pay is called Actual CPC.
Actual CPC simply means that you only pay the cost that is minimally required to beat the ad rank (position) of the competitor immediately below you.
For example, let’s go back to our hotels A, B, and C.
If your maximum bid is €3 and hotel B will only pay a maximum of €2.5 for a click, you are not going to pay €3 in order to position in front of him. You will only pay €2.51 – just one cent more will be enough to beat his maximum bid and place your ad before his ad.
You can adjust your bidding manually for ad groups and keywords. This way, you can raise your maximum cost per click for keywords that are performing well, and reduce it for others:
I have censored my keywords, but you get the idea. 🙂
4. Enhanced CPC
Enhanced Cost per Click is something like a mini strategy within the Manual CPC one:
With this option from all Google Ads bidding strategies, you will still control your maximum costs that you are willing to pay for a click manually. However, this time Google will use Smart bidding to optimize your bids for conversions or conversions value.
In other words, the platform will try to get you the most potential customers possible within your budget and CPC limits.
Smart bidding is a set of automated strategies that uses Machine Learning to determine the likelihood of driving a sale with your ad for a specific search.
For example, if a user types “Cheap hotels in Málaga“, Smart Bidding will look for signals to evaluate the intention of the user, such as:
For example, if the person is searching from a mobile device, this could mean that he is already in Málaga or on his way to the Spanish city.
If Google considers that the user’s search from a mobile device means that there is likelihood for him to purchase your product (a room in your hotel), it might increase your maximum cost per click.
This way, the platform will try to improve your ad rank with the intention to win that customer.
Google Ads can optimize your bid based on the specific location of the user.
Back to our hotel chain example, let’s say that you have limited the location of your campaigns to Rome, Italy, because you have a lot of hotel guests from this beautiful city. Your budget is very limited, so you don’t want to expand it much more than that.
Let’s say that a person in Milan is looking for “best hotels in Malaga”. If Google considers him highly likely to rent a hotel room from you, it can still adjust your bid and show your ad to this potential customer from Milan.
The hotel example is perfect to describe the location intent signal. Google can adjust bids for people who are actively researching a vacation destination that you offer.
So, if a person is looking for “hotels in Málaga June“, he is showing a location intention. In this case, Google might adjust bids for this search even if the user is not physically located near Málaga.
Weekday and Time of Day
Another signal that Google uses to know when to apply Smart Bidding is weekday and time of the day.
For example, hotels usually receive the majority of their guests during the weekend. In this case, Google might adjust your bids on a Thursday when people are most likely to make a reservation. Maybe time of the day doesn´t necessarily apply to hotels, but it could be a good indicador for restaurants.
An interesting signal that could indicate purchase intention for certain businesses is the user´s browser. For example, if Google has identified a higher conversion likelihood in the past for Chrome compared to other browsers, it might adjust bids when the user is searching from Chrome.
Google Ads might optimize bids for demographic elements such as age and gender.
Let´s say that you are a shop that sells toys. If Google has identified that someone is likely to be a parent, it might increase your maximum cost per click for that bid to promote the new toys collection.
These are only a few of the signals that Google uses to identify intention to purchase. However, there are many more! You can check the full list here, by expanding the Automated bidding signals section.
5. Maximize clicks
Maximize clicks is one of the simplest Google Ads bidding strategies that you can choose for your campaigns. It is also very easy to understand.
If you choose this strategy, Google will show your ad to those users who are most likely to click on it – of course, within your budget. And, consequently, it will show it less to users who are not expected to click on it.
As I already explained, Google uses algorithms that are little known to the public to determine the likelihood of a user clicking on your ad.
What you need to know about this bidding strategy is that the cost for a single click might skyrocket if left unsupervised.
This strategy used to be called Automatic bidding. The reason why is because Google will optimize the way your ad is shown to get the most clicks possible for your budget; whatever the click costs.
In other words, you can end up paying a lot for a single click because Google is bidding automatically to achieve your goal. Which, of course, is not a bad thing, but if you need more control over the cost of your clicks, this might not always be the best option.
Luckily, with this option, Google allows you to set a maximum cost per click (CPC) bid limit. This means that Google can continue bidding automatically as long as a single click doesn’t exceed your set limit.
To select this strategy, choose a campaign, go to Settings and then Bidding.
If you want to have more control over the cost of your clicks, check the box Maximum CPC bid limit. Then, type down the limit that Google will respect during the automatic bidding.
In case you aren’t sure what limit to put, go to your campaign and take a look at the Average Cost per Click for that campaign:
My campaigns are in Bulgarian leva, thus the weird BGN word next to the click :). But of course, your costs will be displayed in the currency that you selected when setting up your Ads account.
If you are just launching the campaign and have no average CPC for comparison, don’t worry. In that case, you can always leave the campaign to run for a bit, and then adjust the limits.
And of course, if you don’t like how Google is managing your ads with this strategy, you can always switch to manual bidding – which is next to explain on our list.
6. Maximize Conversions
As we already explained, conversions in the language of Digital Marketing are simply your potential customers. Literally, people who “convert” into a possible purchase.
We already saw that Google considers a user a conversion when he does a specific action on your website.
It can be filling out a form, viewing multiple pages on your website, playing a video, or any other action that you consider relevant for your business.
However, it is not enough to only visualize the relevant actions that might happen on your website. You need to tell Google in what cases you want a conversion to be counted.
Now, I am not going to enter into detail how to do it, because it´s a whole other topic which I will reserve for another article. You can do this either via Google Ads or Google Analytics. Just click on the corresponding links to see how.
The key takeaway is to know what a conversion is. This way, you will be able to understand how this strategy works compared to the rest of Google Ads bidding strategies.
Now that you understand the concept of a conversion, explaining the Maximize Conversions strategy is very simple.
With this option, Google will automatically set your bids to obtain as many conversions as possible. Of course, while always staying within your budget.
In other words, if Google considers that a user is likely to convert for a specific search term, it might increase your maximum cost per click to win that user. The platform evaluates this likelihood by using the historical information of your campaign, as well as the contextual signals that we just saw.
7. Maximize Conversion Value
This bidding strategy is very similar to Target ROAS.
With this strategy, you will need to set up a conversion in Google Ads, and assign a value to it:
It can be any value that you consider relevant for your business.
For example, if you are selling hotel rooms for 50 EUR per night, you can assign a value of 50 EUR to your conversion. This basically means that each conversion will bring you profit – a value – o 50 EUR.
You can add different value to each product that you sell on your website. So, if you are selling a luxury suite, you can assign 500 EUR instead of 50 EUR, and so on.
Having explained this, understanding this strategy is very simple. Using advanced machine learning to optimize and adjust bids automatically, Google will try to maximize your conversion value within your budget limitations.
8. Target Impression Share
In order to understand this strategy, first we will need to understand a few key concepts.
Impressions are simply the number of times that your ad appears and is seen by a user on Google.
Impression share is the percentage of impressions received by your ad, compared to the total number of possible impressions for a specific search term:
Impression share = impressions / total eligible impressions
If your impression share for a specific ad is high, it means that this ad is appearing for almost all of the searches for a specific search term. Of course, in the case of ads in the Search Network; but we also have impression share in the Display Network as well.
If your impression share is low, it means that your ads is appearing for just a few of these searches.
So, if you choose this strategy, Google will use your target impression share to try and show your ad as many times as possible within your budget.
9. Viewable CPM
This strategy is almost the same as Target Impression share, but for a certain part of the Display Network.
The Display Network includes:
- Display ads – aka those banner ads that you see all over the Internet; 🙂
- Gmail ads – ads that appear in the Gmail inbox of your audience.
- Video ads – ads that you can run on YouTube and other Google partners.
The Viewable CPM strategy is only available for your Display ads (aka banners).
Among all Google Ads bidding strategies, this one is much more simple to understand than it sounds.
CPM means “Cost per thousand impressions“. In other words, the maximum price per click that you are willing to pay for thousand impressions of your banner ads.
The word “viewable” make a reference to the fact that your ad has to be in a viewable position in order for Google to charge you. Simply put, Google won´t charge you if the user isn´t able to see at least 50% of your ad:
If the user only sees a little part of your ad, it doesn´t make sense for Google to charge you for it. After all, this would mean taking your money without giving an opportunity to the user to get convinced by it, and click on it as a consequence.
10. Maximum CPV Bid
The last strategy from our huge Google Ads bidding strategies list is Maximum CPV Bid. It is only available for your video ads.
CPV refers to Cost per View.
In other words, Maximum CPV bid simply means that maximum price that you are willing to pay for a user to view your ad.
Out of all Google Ads Bidding strategies, which is the best one?
Out of all possible answers, the one that most people definitely hate is: It depends.
Every business is unique and success isn´t guaranteed for any strategy until you try it for yourself. I definitely recommend you to try all of them and see which one works for you.
The strategy that we mostly use for our Google search ads at my company is Enhanced CPC, and I like it because it´s not as aggressive as others. And it still allows you to take a good control over your costs per click.
However, this doesn´t mean that it is the best strategy for everyone. So, give them all a try for a couple of weeks each, and see which one works best for you!
Thank you for staying with me throughout this whole article! It has been challenging even for me to write it, as there is a lot of information. And I had to make sure that I wasn´t missing on anything important.
Now it´s your turn! Which Google Ads bidding strategies have you tried? Which ones are completely new to you!
Of course, if you have any doubts or questions, let me know in the comments below! I hope to see you in my next article!