Choosing a Bid Strategy: Is "Smart" Always Right?

Google has been pushing smart bidding for a long time now, using everything from prompts in the ads manager interface, to employing call centers that contact advertisers and strongly advise them to adopt it wherever possible. They always sound confident in this being the right move, warning that you could be missing out on better performance from your campaigns.

As if we didn’t have enough FOMO in our lives…

It’s worth clarifying the difference between “automated” and “smart” bid strategies, because those aren’t the same thing. Basically anything not manual is automated, where the system will set a bid in real time, and the umbrella of automated contains smart bid strategies.

In other words, smart entails automated, but not all automated bid strategies are what Google calls smart. For a quick illustration, below are the available bid strategies (at the time of writing this), and those highlighted are classified as smart bidding:

Automated	Not Automated
Maximize Conversions	Manual CPC
Maximize Conversion Value	Manual CPM
Target CPA	Manual CPV
Target ROAS
Maximize Clicks
Target CPM
Target Impression Share

Why the distinction? Smart bidding trains Google’s machine learning on your conversion data, which can be leveraged to increase conversion volume/value by informing bids in real time. In the rush for every tech company to label everything as AI in recent years, machine learning is often called AI-powered, but the core concept of computers predicting outcomes is the same.

Like any tool, setting, or campaign type in digital advertising, we believe there’s a time and place for everything, and we do indeed opt for smart bidding in many of our clients’ campaigns. That’s not giving away our secret sauce, by the way; it’s a pretty standard idea across the advertising industry to track conversions and try to get the best return on investment. It’s also pretty standard reasoning that if an advertiser wants a lot of conversions, and “Maximize Conversions” is an available bid strategy, that would be a logical choice.

In some cases, however, improving performance could mean using something other than the most obviously-named bid strategy.

Here are 2 example situations where choosing a bid strategy that isn’t “smart” could actually be wise.

Example 1: Conquesting a Competitor in Search

Let’s say you are a new business that most people haven’t heard of before, and so there aren’t many people who search for you by name yet. You’re targeting the keywords of the product/service you offer with search campaigns, but you’re feeling impatient because your competitors are more established and people often search for them by name. You decide you want to get more aggressive by capitalizing on your competitors’ popularity and target searches for their business name to get in front of potential customers. We call this “conquesting”, where the user searches for one thing, and sees an ad for something similar but intentionally different.

This tactic has to be very deliberate in order to have a chance at snagging attention away from the business the people are explicitly searching for. You want to pair it with a strong offer, or some acknowledgement in the ad copy that says you know they searched for the other guys, but should consider you instead because you’re cheaper/closer/better, whatever you want to boast. The probability of getting the click is low by default, much less the conversion, but it could still be worth it to you.

This tactic is more common in highly competitive fields, and the cost can be a deterrent for advertisers. The cost-per-click tends to be quite high because Google rewards those advertisers who align with what the people are searching for, and that means not only the ad copy but the landing page experience, observing if the people got what they wanted. Over time, Google collects data on which ad has the better likelihood of getting a click and lowers their required bid to get them to show higher in the results. That means if you’re conquesting, you’re facing an uphill battle with a lower chance of getting the click and a higher bid required to show up.

If you still want that visibility, it won’t do you any good to show up much lower than the top spot, so bidding manually allows you to bid high and force your way into the frame. You’re essentially telling the system that you don’t care if it’s expensive or unlikely to convert, you want to show up anyway. Using a smart bidding strategy for conquesting likely wouldn’t have the conversion volume necessary to operate effectively, which leads us to…

Example 2: Campaigns with Low Conversion Volume

We all want lots of conversions, but budgets are finite! There are situations where the cost-per-conversion for a given campaign is healthy, yet it might only generate a small quantity of conversions due to budget limitations.

Google will of course say “easy fix, raise your budget”, but we know the solution to everything can’t be just to spend more. We want to find a way that fits within your goals.

In order to properly take advantage of a conversion-based bid strategy, Google needs a decent volume of conversions for machine learning to figure out the optimal bids, and your definition of decent conversion volume and Google’s definition could very well be different. Depending on who you ask in the advertising industry, a common rule of thumb for the Maximize Conversions bid strategy is that the campaign needs to produce at least 30 conversions over the past 30 days to have enough data to effectively inform the system.

When there isn’t enough conversion data, choosing Maximize Clicks as your bid strategy instead could drive more traffic thanks to bid caps being available for that option (it’s not available for Maximize Conversions), which may actually result in more conversions. We explain the math on why increasing your bids to claim the top spot in the search results isn’t always the best idea in this blog post if you’d like to explore that further.

It’s possible that choosing Maximize Clicks will result in a larger percentage of traffic not converting, because you’re telling the system to prioritize more clicks and don’t worry about conversions. But conversion rate is just one metric in the numbers game, so if you end up with more total conversions on the same budget, that would be a win.

So What?

It takes an open mind to look past the word choice of “smart”, since the name itself seems to claim the high ground as the intelligent choice. Just like Performance Max on Google Ads or Advantage Plus on Meta Ads, it’s no accident that the features you get steered towards are named in such a way that suggests you’d have to be a fool not to use them.

Those features can work - even work great in some cases - but any experienced advertiser will affirm that they often benefit the platform and not necessarily the party paying for the ads. We discuss the nuances of yielding control to the ad platforms in this post, by the way.

Choosing a bid strategy isn’t a one-time thing. It also requires a clear goal, and to keep your finger on the pulse of market changes, audience behavior, and day to day performance. That’s just one of the tools at our disposal when making ongoing optimizations to our clients’ ad campaigns. From bid strategy, to creative, to targeting, it all gets evaluated because what works in one account might not work in another, and what has worked in the past is not guaranteed to continue.

We believe the real “smart” strategy is the one that works best for you.