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Industry Trends

Google AdWords Making Bid Management Tools Redundant

By September 24, 2007July 30th, 2023One Comment

Google AdWords have introduced a new method to bid using CPA (cost per acquisition). The new tool, called the Conversion Optimizer was made publicly available earlier today. It allows advertisers to specify a maximum CPA for their ads and then adjusts bids to meet that CPA target.

Bid management tools became extremely successful because they enabled advertisers to manage their bids according to an ROI objective. Other handy features that most bid management tools touted were the ability to bid to a specific position and day-parts bidding. Google has consistently worked on the introduction of new features that enable handling these advanced bidding techniques from within the AdWords system itself.

Advertisers simply specify a maximum cost per acquisition bid for each Ad Group. Conversion Optimizer then manages the CPC bids automatically by predicting a conversion rate for the ad every time it’s eligible to appear. The expected conversion rate gets calculated based on the keywords in the Ad Group, the search query, the user’s location, the conversion history of the individual keywords and the overall Ad Group, and the conversion history of the particular site in the Google Content Network.

Conversion Optimizer, currently in beta, requires AdWords advertisers to use the conversion tracking tool and that the campaign has at least 300 conversions in the past 30 days. This ensures that the tool has enough data to base its conversion rate predictions on. Smaller B2B services companies might not be able to use this tool since an average of 15 conversions per working day is rather high in most service-related industries.

The maximum CPA targets are not guaranteed. If the actual conversion rates are lower than the predicted values, advertiser costs per click can exceed their specified cost per acquisition. However, since the Conversion Optimizer uses real-time data to calculate a new CPC bid for each time the ad appears, advertisers are more likely to spend money only on sites and search queries where their ad is most likely to get conversions.

Pay-per-action Ads were the first form of CPA bidding that Google introduced in beta earlier this year, and were available only to advertisers in the USA for ads appearing in certain content network sites. The new Conversion Optimizer enables CPA bidding on both content and search network ads.