Every time a user performs a search in Google a process called an auction takes place to determine what ads will show and where they will appear in the search results. Google calculates an Ad Rank for all ads in the auction and those with the highest rank will generally be positioned highest among ads shown. Ad Rank is determined by six variables: bid amount, quality of the ad, ad rank thresholds, competition from other ads, context of the user’s search, and expected impact from ad extensions & other ad formats. In this series we will focus on the first variable and take a look at different bidding strategies.
Target ROAS bidding is a Google Ads Smart Bidding strategy based on return on ad spend (ROAS). With this strategy the advertiser sets their target ROAS as a percentage and bids are automatically optimized to achieve this target. It is important to note that the ROAS is determined by conversion values that will need to be set by the advertiser. A conversion is an action taken by a customer that has been deemed as valuable, some examples include; phone calls, website actions, online purchases, app downloads, in app actions, etc. Different types of conversions can bring different levels of value to a business and this is where conversion values come in to play. If the advertiser measures the worth of an online sign-up to be four times that of a phone call, they might set the conversion value of a sign-up at $20 and a phone call at $5. The target ROAS is the average conversion value for each dollar spent. Google Ads will recommend a target ROAS which is based on historical data from your campaigns. There are conversion requirements to use Target ROAS as to give machine learning algorithms enough data to make informed bidding decisions to maximize results. For most campaign types this is at least 20 conversions in the past 45 days. Search campaigns need at least 15 conversions in the past 30 days, but it is recommended to have at least 50 conversions in the last 30 days. App campaigns (Target ROAS is currently in beta for App campaigns) need at least 10 conversions a day. Target ROAS optimizes your bids using real time data, because of this existing bid adjustments are not used (except mobile bid adjustments can still be set to -100%). It is not recommended to set bid limits if using this strategy. Bid limits can interfere with automatic optimization and prevent bids from meeting the target ROAS. Bid limits only apply in Search Network auctions. This strategy works by Google Ads automating the maximum cost per click for each auction using the reported conversion values and predicting the likelihood of future conversions from historical and real time data.
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