The Pros and Cons of Using Smart Bidding

Google Ads offer businesses a range of different bidding strategies to best suit your objectives – but how do you know if you’re using the right one?

Delving into the complex maze that is Google Ads can feel like a minefield, but the search engine does have a few tricks up its sleeve to help out. Since being debuted back in 2018, smart bidding is a useful way of automating the bidding process within Google Ads.

Working to optimise for conversions or conversion value in PPC campaigns, smart bidding utilises machine learning to study enormous amounts of data to make predictions about how different bid amounts will affect conversions.

So, let’s dive into the world of smart bidding, the various smart bidding strategies, the pros and cons of the technique and what impact it could have on you and your business.

What is smart bidding?

Before we get into the different smart bidding strategies, let’s just clear up what smart bidding actually is.

Smart bidding vs automated bidding

The terms smart bidding and automated bidding are often seen as one and the same. Though they’re similar, it’s best to think of automated bidding as an umbrella term that smart bidding slots into.

Automated bidding strategies use machine learning to help set your bids to help you meet certain goals, and smart bidding strategies fit under that as a specific group of automated bidding strategies to drive conversions and revenue.

How does smart bidding work?

The bidding market on Google is incredibly dynamic and constantly evolving, with Google seeing around 8.5 billion searches per day. With that in mind, you need to stay ahead of the game and gain an edge over a bunch of other competitors. So, why not let Google do some of the hard work for you?

With smart bidding, you tell Google Ads how much of your budget you want to put into ad spend for your ads to show, alongside what targets you’re seeking to hit, whether that be a lower CPA, increased conversions or a better return on ad spend.

Recent updates mean that smart bidding strategies can now group performance goals together, and using smart bidding allows you to utilise signals, which are identifiable attributes about a user that can include details like device and location.

What are the smart bidding strategies?

Smart bidding is made up of a few different strategies, and which one you adopt will depend on what your business goals are. Here’s four of the key strategies you’re likely to utilise:

Maximise conversions

Maximise conversions is a totally automated bidding strategy, with one main goal: to help you get the most conversions possible from your allocated daily budget, choosing a CPC bid based on your bidding strategy’s goal.

And since 2021, you can now use a target cost-per-acquisition (the amount you pay for each conversion), or CPA, to continue guiding your bids – but this is an optional step.

This strategy is ideal for those with smaller budgets, like small businesses, as it relies on driving a minimum of five conversions per month – good if you’re wanting to drive volume but it can be at the sacrifice of ROAS.

Maximise conversion value

Essentially the same as maximise conversions, maximise conversion value is just slightly more advanced. Rather than looking to bring in a load of conversions, maximise conversion value looks towards bringing in the conversions that have the most value. As they say, quality over quantity.

This strategy maintains your target CPA, as Google sets bids based on the probability of conversion, all in the hopes of preventing paying for unprofitable clicks. This means you no longer need to choose between the previous smart bidding performance objectives of maximise conversion value and target ROAS.

Target impression share

Relatively new to the smart bidding market (if you still consider 2018 as recent!), the goal of the target impression share strategy is to set bids that show your ad at the top of the page/first in the carousel as often as possible – to maximise your share of search ad impressions against your competitors.

Though this strategy works to increase your site, this isn’t to say those people will have a higher purchase intent, alongside impairing your conversion rate and ROAS.

Enhanced CPC

Similar to manual bidding, the enhanced CPC method allows the Google Ads algorithm to make decisions and changes to a manually-set keyword bid, optimising your maximum CPC to increase conversions. It’s important to note that ECPC is not always recognised by the community as a smart bidding method, though Google does auto adjust CPCs to auction conditions.

You set the average cost that you’d be happy paying for a single conversion, and the strategy works by making automatic changes to a manually-set keyword bid, bidding higher on searches that Google consider being more probable to lead to a conversion. This technique weaves in elements of automation, but still allows you to maintain control over the entire process.

The pros and cons of smart bidding

Pros

The biggest pro when it comes to smart bidding is time efficiency. At the end of the day, automation = time saved, and when time is money…it’s a no-brainer really.

Without needing to allocate time out of your day for manual bids, smart bidding allows the algorithm to bid for you to make the most out of your budget.

While smart bidding can be utilised by businesses of all shapes and sizes, it’s a great tool to harness if you’re on the smaller side and don’t yet have the expertise to fully take PPC to its full potential. With that in mind, smart bidding utilises the data from machine learning, helping smaller businesses enhance their PPC performance without needing an extensive archive of account/campaign data.

Similarly, another benefit of smart bidding is its ability to quickly react to any changes you make to your campaigns and/or Ad Groups, so you don’t have to worry about manually doing it yourself.

Cons

Though smart bidding is an innovative, incredibly helpful piece of kit to add to your toolbox, it does come with a few practical problems.

For example, the data that smart bidding collates may not be entirely relevant to your target audience. As a result, this irrelevant data may be a huge hindrance, diluting your ROAS and reducing the number of conversions you gain.

Additionally, as any marketer will know, search is constantly changing and updating, but smart bidding doesn’t always react instantly to the latest fluctuations in search trends. Consequently, this means you may not be able to capitalise on any new opportunities straight off the bat, potentially putting you behind competitors.

What impact will this have on your PPC performance?

As campaigns change over time, it is important to not set and forget the targets you have put in place for your campaigns. Looking at your actual campaign performance can signify if you need to pull back or if you still have headroom to expand to hit your goals.
Smart bidding removes the need to constantly be pushing and pulling bids allowing you more time to think strategically on how to maximise performance from your campaigns.

Plan long term and correlate your smart bidding with market factors and change. Seasonality and hot topics can have a huge impact on search volume, using a data backed approach you can (try) to stay ahead and keep your smart bidding efficient.

How do you know if your bidding strategy is right for your business?