What is Smart Bidding & Why You Need To Leverage It
Smart Bidding might seem like a quick and easy way to hand over your hard-earned cash to Google, don’t worry, we’re still sceptical at times. However, seeing results from testing different bidding strategies across a variety of verticals, it’s quite hard to argue despite losing one of the legacy aspects of controlling your media spend.
We’re going to cover what Smart Bidding is, the arguments between Smart vs Manual bidding, the different types of Smart Bidding, when you should and/or shouldn’t use it, and of course blow our own trumpet a lil’ with some of the success we have seen!
What is smart bidding?
Google’s definition of smart bidding is:
“Smart Bidding is a subset of automated bid strategies that use machine learning to optimise for conversions or conversion value in each and every auction – a feature known as ‘auction-time bidding’”
Google are quite good at spouting technical gibberish, it must be good right? Let’s break it down by looking at the two options for controlling your bids.
Using manual bidding, you have full control of the bid at a keyword level. You are able to make logical decisions on whether to increase or decrease by using performance metrics such as ad positioning and total impression/click shares, ultimately to improve or reduce your bottom line KPI of cost per conversion or return on ad spend.
Smart bidding is Google’s black box of data. It will then leverage a wide range of contextual data signals within its algorithm to optimise your bids to an appropriate level at the current time of the auction. Ultimately, Google will set your bids to maximise your chances of receiving a click from a user who has a higher intent to convert.
These are basically datasets you use to determine optimisations within your account. For example, you may look at ad scheduling and find an unprofitable period during the day so you reduce your bids to save spend and cut back on duff traffic. Likewise, you may find that mobile users convert excellently on a specific campaign so you increase your mobile bid modifiers by +30%.
Smart bidding utilises all of the legacy datasets to determine your keyword bid, and then some. A few of the extra data points that smart bidding uses and are unavailable for manual are:
- Ad characteristics
- Location intent
- Interface language
- Operating system
- Site behaviour
- Product attributes (shopping)
- Price competitiveness (shopping)
- Seasonality (shopping)
Smart v manual bidding arguments
Pros of Manual Bidding
- You have full control over your spend
- You are able to use keyword data to make informed bid decisions
- You know the intent level of each keyword at face-value
- You can manipulate your placement in the search. P1 not profitable? Cool, drop to P3
Cons of Manual Bidding
- Your bid is static to what you set it as (unless running ECPC)
- Ad inventory is more competitive than ever
- Can be complex and time-consuming to run a deep-dive keyword analysis
- Increase in smart bidding popularity may have your ads not show at all
- Chance of human error (that £1 bid is now £11, whoops)
Pros of Smart Bidding
- Real-time bidding optimisation (most likely amalgamated from hundreds of advertisers)
- Less time-intensive
- Less human error
- Performance targets to meet your business goals
- Fully transparent performance reporting (unlike Smart Shopping)
Cons of Smart Bidding
- Needs a little patience throughout “learning phase”
- Can have a tendency to over-deliver spend
- Will not react well to seasonal or out-of-ordinary events such as Black Friday
- Lack of control over keyword spend
- Volatility in cost per clicks
Now that you’re aware of what comes with smart bidding, what options are there to explore? Not all smart bidding strategies are suitable for particular businesses, however, there will be at least one that will suit your needs. It all depends on what KPI your account is measured against.
Types of smart bidding
Enhanced CPC otherwise known as ECPC can technically still be seen as a manual bidding strategy as you have the option to increase/decrease your bid. However, having ECPC enabled, you are giving Google the green light to increase your bids by upwards of 100% (historically this was 20%) if they see an opportunity to increase your total conversion volume.
If you are worried about your cost per clicks rising, graded on revenue per click or other CPC performance aspects, this is most likely going to be the best smart bidding strategy for you.
Likewise, if you aren’t ready to give google complete control of your bids, this is a good way to maintain control whilst utilising the smart bidding features.
Target Cost Per Acquisition is a bidding strategy where you feed Google your desired CPA target, and it will optimise the bids to return conversions at the target set.
Be careful however to not set your CPA too low otherwise you’ll throttle the performance. It is also recommended that you have at least 5x the target acquisition cost set as your daily budget.
Historically, you were also required to meet the conversion criteria to use target CPA. This was around 15 conversions in the last 30 days, with the more conversion data the better. This is now not the case, however, we would not recommend using tCPA on a fresh campaign as you can really lower your conversion quality.
Target Return On Ad Spend is practically the same as tCPA. Instead of inputting an acquisition target, you are required to feed Google an ROI target. The main difference here however is that instead of focusing on total conversion volume, it focuses on profit. For eCommerce advertisers, this can be a godsend if you are wanting to maintain an agreed ROI throughout.
Despite this, TROAS can arguably be one of the most complex smart bidding strategies, especially if you are advertising extremely high AOV products as this boost your ROI insanely, and likewise telling Google their job is done so they will chill on generating revenue. We’ll talk more into this later and how we combat this.
Maximise Conversions/Maximise Conversion Value
Not much to say here other than the name really! Google will optimise your bids to drive as many conversions, or as much revenue as possible within your budget. It will not take into consideration lead quality or profit margins from historical data.
Before using this smart bidding strategy though, please be aware that Google will spend your entire daily budget, if not more. However for new accounts that are set up correctly, or if you have refreshed a legacy campaign and need to turbocharge it, this is an option to gather data.
This is similar to the Maximise Conversions. Just replace conversions with clicks and this is this smart bidding strategy summed up! Likewise, I’d like to reiterate that you should use these strategies with care, as they are a very quick and easy way to deplete your daily budget. However, they do have their place depending on your overarching goal.
Target Impression Share
Probably one of the least popular smart bidding strategies and more commonly used for brand awareness. Target Impression Share bids automatically to help you achieve your Impression Share goal across your campaign. For example, you may have a branded campaign that you want to dominate. You could use Target Impression Share to capture 100% of available Impressions and to avoid having competitors bidding on your name. However, in terms of Branded keywords, you can normally generate a similar result using Manual at a cheaper cost-per-click.
When to use smart bidding
So when should you use smart bidding? Well, this depends on a number of variables. for example, how mature is your account? Is your account tracking valuable conversions? Is your account setup efficient?
The list goes on, and this is something you should be able to identify as a PPC manager. However, if you’re good to go, we would recommend testing ASAP. Not too keen on rolling out your top-performing campaign on a fully automated bidding strategy though? Good thing there’s an option here.
Setting Up a Smart Bidding Experiment
Within your UI, navigate down to Drafts & Experiments. Here you’ll be able to perform tests within your Search and Display Network campaigns. Ultimately, you are able to create a “duplicate” of your existing campaigns, and then perform experiments on them without impacting your core campaign.
For example, here you could split a draft of your top-performing campaign. Then choose your desired smart bidding strategy and allocate whatever percentage of total spend to it. Let it run then re-analyse after X amount of days/conversions. However, do let it run for a decent amount of time and/or allow it to gather conversions. You will then be able to make a logical decision on whether smart bidding is for you.
When not to use smart bidding
With all things automation, there are always areas that are limited and should be avoided like the plague. The major one here though is that smart bidding should not be used on fresh accounts where data is limited and not at Google’s desired level to feed machine learning.
Here we would recommend sticking with a manual bidding strategy and continue testing until you find what works for your business. Then do it some more. Rinse and repeat this until you have a good solid amount of data within the account across various campaign themes and also considered seasonality trends.
Then, begin slowly testing smart bidding strategies. Always remember to monitor your bottom line metrics closely, but more importantly give it time. You may see performance drop for a week or two, and this is normal (yet freaking nerve-wracking). Once it has steadied out, analyse your results then roll it out to other campaigns if you have seen success. Good luck!
Albeit, smart bidding really can free up a lot of time by automating repetitive tasks, however, you shouldn’t have a ‘set it and forget it’ approach. Find some of our best practices on optimising your smart bidding strategy
- Review your target CPA/ROAS at least bi-weekly and making only 10-20% changes
- Optimising further data signals such as device and demographic modifiers
- Thoroughly review your search term reports to ensure intentful traffic is being served
- Feed each campaign enough budget (if possible, don’t sweat it as long as business goals are being met)
- Pair Response Search Ads with automated bidding (wow, do you work at Google?)
- Focus on keyword expansion with your extra free time
Our success with smart bidding
Being completely honest, I was late to the smart bidding party. I was quite sceptical at first. Especially as smart bidding started to improve in its machine learnings, I was also quite new to the Paid Media world. Despite this, we have seen massive success especially in one of our eCommerce clients by leveraging tROAS.
This client is a high-end retailer with a very high average order value north of £1,200. In an extremely competitive marketplace against some huge retailers who will inevitably have budgets of at least 10x higher than what we were working with.
We finally managed to generate a solid amount of conversions through the search and shopping campaigns (check out how we tackled Shopping here), and got the approval from big G to switch to smart bidding.
From this, we saw a +296% increase in Non-Branded revenue, a +71% increase in Non-Branded ROI and +22% increase in Average Order Value. Not too shabby, hey?!
This was predominantly driven by capitalising on “off-peak” traffic, for when our competitors were naturally bidding less as common sense towards user behaviour at specific times would dictate. This also really proved the worth of the added data signals used from smart bidding which have rewarded this particular client.
So there we have it, all of the Smart Bidding options you are able to use within your account. It is worth always remembering when looking at these strategies that Google’s main aim behind these are yes, to generate positive results to keep businesses and advertisers to continue using their platform, but ultimately to generate as much advertising revenue as possible.
Always conduct your own analysis on whether you are actually being profitable leveraging smart bidding. There are many reasons why these strategies may, and at some point won’t work in your account. However, with the general nature of media buying in 2020, we must keep on top of trends and feed into Google’s monopoly.
Interested in how smart bidding could aid in boosting your PPC performance? Get in touch and we’ll have a good chat over potential opportunities.