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 CPA is a bidding strategy in which the advertiser sets the desired average amount paid for a conversion and the advertiser chooses what types of conversions to bid for. The goal is to get the most conversions possible that are equal to or less than the set target cost-per-action (CPA). This is achieved through advanced machine learning that automatically optimizes bids at the time of auction. Both historical data and context of the auction are important factors in what determines the amount of each bid. If historical data is available, Google will recommend a target CPA that has been calculated based on actual CPA from the last few weeks and you can choose whether to use the recommendation or to set your own target. It is important to note that if the target is set too low it may result in fewer clicks and conversions. Bids can end up costing more or less than the set target, but Google Ads will try to keep the average at the target. Bids are determined in real-time for auctions using contextual signals such as device type, browser, location, time of day, etc. Device bid adjustments allow for prioritization of conversions by the device used, whether it’s on a desktop, tablet, or mobile device. Other types of bid adjustments will be ignored on the Search Network and it is recommended to remove any manual CPC bid adjustments when switching to Target CPA. Bid limits are also recommended to be removed as they can adversely effect target CPA bid optimization. This strategy can be applied as a standard strategy in one campaign or as a portfolio strategy in multiple campaigns.
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