Smart Bidding

What is Smart Bidding?

Smart Bidding is Google's suite of automated bid strategies that use machine learning to optimize for conversions or conversion value in every auction—a capability called "auction-time bidding."

In 2025, Smart Bidding algorithms process over 70 billion signals daily, including:

• Device and operating system
• Location and time of day
• Remarketing list membership
• Browser and language
• Demographics and interests
• Ad characteristics
• Search query context
• Competitive landscape

| Smart Bidding Strategy | Optimizes For | Best When | |-----------------------|---------------|-----------| | Maximize Conversions | Number of conversions | Starting out, volume focus | | Target CPA | Conversions at target cost | Scaling with efficiency | | Maximize Conversion Value | Total revenue/value | Variable-value conversions | | Target ROAS | Return on ad spend | E-commerce, ROI focus |

Maximize Conversions

Maximize Conversions automatically sets bids to get the most conversions within your budget.

How It Works

Algorithm Logic:
- Analyzes historical conversion data
- Predicts conversion probability for each auction
- Sets bid to maximize total conversions
- Spends full daily budget

When to Use

• New campaigns without historical data
• When conversion volume matters most
• Testing phase before implementing targets
• Lower-funnel, high-intent campaigns

Considerations

• Will spend full budget regardless of CPA
• No control over cost per conversion
• Best for campaigns with consistent conversion value
• Add Target CPA constraint when efficiency matters

Tip: Start with Maximize Conversions to build data, then switch to Target CPA once you have 30+ conversions/month and understand your baseline CPA.

Target CPA

Target CPA (Cost Per Acquisition) tells Google to get as many conversions as possible at or below your specified cost per conversion.

How It Works

// Conceptual Target CPA logic
if (predictedConversionProbability * maxBid >= targetCPA) {
  // Bid aggressively
  bid = calculateOptimalBid(targetCPA, probability);
} else {
  // Bid conservatively or skip auction
  bid = reducedBid || skipAuction;
}

Setting Your Target

| Approach | Method | |----------|--------| | Conservative | Set 10-20% above historical CPA | | Aggressive | Set at historical CPA | | Google Suggested | Use recommended target (often higher) |

Best Practice: Start with a target 10-15% higher than your historical average CPA, then gradually reduce as the algorithm learns.

Target CPA Characteristics

• May not spend full budget if target is too aggressive
• Works best with consistent conversion values
• Ideal for lead generation campaigns
• Requires 30+ conversions in 30 days

Maximize Conversion Value

Maximize Conversion Value optimizes for the total value of conversions rather than the count, spending your full budget to maximize revenue.

When to Use

• E-commerce with varying product prices
• When not all conversions are equal value
• Lead scoring with different lead values
• Want to maximize revenue, not just volume

Requirements

• Conversion value tracking enabled
• Values passed with each conversion
• Sufficient conversion volume

<!-- Example: Passing conversion value -->
<script>
  gtag('event', 'conversion', {
    'send_to': 'AW-XXXXX/XXXXX',
    'value': 149.99,
    'currency': 'USD'
  });
</script>

Target ROAS

Target ROAS (Return on Ad Spend) optimizes to achieve a specific return on your advertising investment.

Understanding ROAS

ROAS = Conversion Value / Ad Spend × 100%

Example:
- Ad Spend: $1,000
- Revenue: $4,000
- ROAS: 400% (or 4:1)

Setting Target ROAS

Calculate Breakeven ROAS:

Breakeven ROAS = 1 / Profit Margin

Example:
- Profit margin: 50%
- Breakeven ROAS: 1 / 0.50 = 200% (2:1)
- Target ROAS: 300-400% for profit

Target ROAS Best Practices

• Don't set bid limits—restricts optimization
• Start with achievable target based on historical data
• Account for full customer value, not just first purchase
• Works best with high volume, variable-value conversions

| Scenario | Recommended Target ROAS | |----------|------------------------| | High margin (60%+) | 200-300% | | Medium margin (40-60%) | 300-500% | | Low margin (20-40%) | 500-800% |

Data Requirements

Smart Bidding needs sufficient conversion data to optimize effectively:

| Strategy | Minimum Conversions | Recommended | |----------|--------------------| ------------| | Maximize Conversions | 15 in 30 days | 30+ | | Target CPA | 30 in 30 days | 50+ | | Maximize Conv. Value | 30 in 30 days | 50+ | | Target ROAS | 50 in 30 days | 100+ |

Warning: Accounts with insufficient data see 23% worse performance when rushing into Smart Bidding strategies. Build your data foundation first.

Learning Period

After any significant change, Smart Bidding enters a learning period of approximately 1-2 weeks:

What Triggers Learning

• New campaign launch
• Bidding strategy change
• Target CPA/ROAS adjustment
• Conversion action changes
• Large budget changes (>20%)

During Learning Period

• Performance may be volatile
• Allow 7-14 days before judging
• Avoid making additional changes
• Don't pause or modify campaign

Best Practices

## Minimizing Learning Disruption

✓ Make one change at a time
✓ Wait 2 weeks between significant changes
✓ Separate budget increases from bid strategy changes
✓ Avoid changes during peak seasons
✓ Monitor but don't react to daily fluctuations

Choosing the Right Strategy

Decision Framework

What stage is your campaign?

New Campaign (< 30 conversions/month)
└── Start with Maximize Conversions
    └── Build data for 4-6 weeks
        └── Then evaluate Target CPA or ROAS

Established Campaign (30+ conversions/month)
├── All conversions equal value?
│   └── Target CPA
└── Variable conversion values?
    └── Target ROAS or Max Conversion Value

Scaling Campaign (100+ conversions/month)
└── Target ROAS for efficiency at scale

Strategy Comparison

| Factor | Target CPA | Target ROAS | |--------|-----------|-------------| | Conversion Tracking | Count only | Value required | | Best For | Lead gen, flat pricing | E-commerce, varied products | | Budget Behavior | May underspend | May underspend | | Control Level | Moderate | Moderate | | Data Needs | 30+ conv/month | 50+ conv/month |

Manual vs Smart Bidding

When Manual Bidding Makes Sense

• Very low conversion volume (<15/month)
• Highly seasonal with unpredictable patterns
• Need complete auction-level control
• Testing new campaigns/keywords

When Smart Bidding Excels

• Sufficient conversion data
• Consistent conversion patterns
• Large account with many keywords
• Want to optimize at scale

2025 Bidding Distribution

| Strategy | % of Ad Spend | |----------|---------------| | Maximize Conversions | 33% | | Target ROAS | 33% | | Maximize Conv. Value | 15% | | Target CPA | 10% | | Manual/Other | 9% |

Final Tip: Smart Bidding works best when you provide good inputs: accurate conversion tracking, realistic targets, and sufficient budget. The algorithm optimizes within the constraints you set—garbage in, garbage out.