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Bid strategy optimization

Configure and optimize Google Ads automated bidding strategies including Target ROAS, Maximize Conversions, and margin-aware bidding for Performance Max.

Google Ads automated bidding uses machine learning to set bids in real time for every auction. The algorithm considers hundreds of contextual signals — device, location, time of day, audience segment, query intent, browser, operating system — that no human could process manually. The strategy you select determines what the algorithm optimizes for and how aggressively it pursues that objective.

Smart Bidding Strategies

Google offers four core Smart Bidding strategies, each suited to different business objectives:

Maximize Conversions

Sets bids to get the maximum number of conversions within your budget. This strategy will spend your entire daily budget. Use it when your primary goal is volume and all conversions have roughly equal value.

When to use: Lead generation campaigns where each lead has similar value. New campaigns that need to accumulate conversion data quickly before switching to a value-based strategy.

Maximize Conversion Value

Sets bids to maximize the total conversion value within your budget. Requires that you pass conversion values (revenue, estimated LTV) with your conversion events. The algorithm prioritizes high-value conversions over low-value ones.

When to use: E-commerce campaigns where order values vary significantly. B2B campaigns with multiple conversion actions weighted by lead quality.

Target CPA (Cost Per Acquisition)

Sets bids to achieve the maximum conversions at or below your target cost per acquisition. This is technically a sub-strategy of Maximize Conversions with a target constraint.

When to use: When you have a firm CPA ceiling driven by unit economics. Mature campaigns with stable conversion rates where you need predictable acquisition costs.

Target ROAS (Return on Ad Spend)

Sets bids to achieve the maximum conversion value at or above your target return on ad spend. This is the most sophisticated strategy for value-based bidding. A Target ROAS of 400% means you expect $4 in conversion value for every $1 in ad spend.

When to use: E-commerce with accurate revenue tracking. Any business where you can assign meaningful monetary values to different conversion types and need to maintain profitability thresholds.

Margin-Aware Bidding

Standard ROAS-based bidding optimizes for revenue, but revenue is not profit. A $500 sale with 10% margin is worth less than a $200 sale with 60% margin. Margin-aware bidding solves this by passing profit or margin as the conversion value instead of revenue.

Implementation

Instead of sending order revenue as the conversion value, calculate and send gross profit:

  • Gross profit value: Revenue minus cost of goods sold (COGS) for each transaction.
  • Cart-level margin data: Pass the aggregate margin of the cart, not just the total revenue.
  • Conversion value rules: Google Ads allows you to apply multipliers to conversion values based on audience, location, or device. Use these to adjust values based on average margin profiles for different segments.

This approach ensures that Smart Bidding pursues profitable growth, not just top-line revenue. Advertisers who switch from revenue-based to margin-based bidding often see a 15-30% improvement in actual profit from the same ad spend.

Performance Max Optimization

Performance Max campaigns use automated bidding across all Google inventory (Search, Display, YouTube, Discovery, Gmail, Maps). Optimization levers are more limited than standard campaigns, but critical decisions remain:

  • Asset group structure: Organize asset groups around product categories or audience segments with distinct value profiles. Do not combine high-margin and low-margin products in the same asset group.
  • Audience signals: Provide strong audience signals (customer lists, custom segments, in-market audiences) to guide the algorithm during the learning phase.
  • Search theme targeting: Added in 2024, search themes let you direct Performance Max toward specific query categories. Use them to ensure coverage of high-intent queries.
  • Exclusions: Use brand exclusions to prevent Performance Max from cannibalizing branded search campaigns. Add negative keywords at the account level to prevent wasted spend on irrelevant queries.

Bidding Strategy Transitions

Switching between strategies requires careful management:

  • Allow 2-3 weeks of learning period after any strategy change. Performance will fluctuate during this time.
  • Do not change targets (CPA or ROAS) by more than 15-20% at a time. Aggressive target changes restart the learning period.
  • Monitor the "bid strategy report" in Google Ads for signals on target achievability.
  • Ensure your conversion tracking (enhanced conversions, server-side tracking) is stable before relying on value-based bidding.

Sources

Attribution model selection

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