A Beginner’s Guide To CPA Bidding
Target CPA is an AdWords Smart Bidding strategy that sets bids to help get as many conversions as possible at the target cost-per-acquisition (CPA) you set. It uses advanced machine learning to automatically optimize bids and offers auction-time bidding capabilities that tailor bids for each and every auction. Target CPA is available as either a standard strategy in a single campaign or as a portfolio strategy across multiple campaigns and ad groups.
Using historical information about your campaign and evaluating the contextual signals present at auction-time, Target CPA bidding automatically finds an optimal CPC bid for your ad each time it’s eligible to appear. AdWords sets these bids to achieve an average CPA equal to your target across all ad groups and campaigns using this strategy.
Some conversions may cost more than your target and some may cost less, but altogether AdWords will try to keep your cost per conversion equal to the target CPA you set. These changes in CPA take place because your actual CPA depends on factors outside Google’s control, like changes to your website or ads or increased competition in ad auctions. Additionally, your actual conversion rate can be lower or higher than the predicted conversion rate.
For example, if you choose a target CPA of $10, AdWords will automatically set your CPC bids to try to get you as many conversions at $10 on average. To help improve your performance in every ad auction, this strategy adjusts bids using real-time signals like device, browser, location, time of day, remarketing list, and more.
There are mixed feelings about using Target CPA bidding. But there’s one big question: are there enough benefits to CPA bidding to rationalize forfeiting the control that manual bid changes give us?
If I increase my target CPA, will I get more conversions?
Yes. If increasing cost-per-conversion is not a concern, go ahead and increase CPA targets and receive more conversions. In the first chart, targets were increased in high converting ad groups and conversions rose accordingly. Actual cost-per-conversion increased 27% after 30 days and conversions increased by 67%. Because conversion volume is the goal, the 67% increase in conversions outweighs the 27% increase in cost-per-conversion.
But wait! Before you commit to CPA bidding, let’s remember that target CPAs are simply guidelines for bid aggression. Actual costs-per-conversion rarely line up directly with target CPAs. When we increase targets, we are telling Google to be more aggressive with our bids. This will cause conversion rates to drop and cost-per-conversion to increase. In the example below, the ad group saw a 2% increase in CPA Target and a 51% increase in actual cost-per-conversion.
How long should I run CPA Bidding before I judge performance?
Usually, 30 days is the appropriate amount of time to start drawing conclusions about the success (or failure) of CPA bidding. Depending on the volume of conversions in the campaign, it might take longer for a lower converting campaign to start performing close to goal. I have come to expect that when first starting CPA bidding cost-per-conversions will fluctuate for the first couple days after I’ve changed the bid strategy.
Conclusion
When there is high conversion volume and a hard cost-per-conversion goal, this is usually the perfect opportunity to try CPA Bidding, but even though setting a target CPA seems like a good bid strategy to increase traffic and therefore revenue. It is important to remember that setting a CPA target that is too high may actually affect the real Cost Per Acquisition in a negative way without necessarily boosting conversions. In other words, Target CPA bidding is a useful tool, but tread carefully, as setting bids that are too high can backlash, and overthrow the balance between additional conversions and target CPA.
