When Google first introduced Enhanced CPC bidding back in 2010, it dynamically adjusted campaign bids for keywords and ads that Google thought were more likely to convert.
But as we enter a new decade, perhaps it’s time we take a look at how effective Enhanced CPC bidding is. And, more importantly, if it really is optimizing your ad spend.
After all, we’ve said it before:
“Google isn’t out to make you the most money it can. At the end of the day, Google’s making money off every click on your ads, not every quality conversion your ads generate for your business. That part is on you.”
To make sure that you aren’t blindly letting Google take the reigns over your campaigns, it’s important you understand the different CPC and bid options you have to choose from within Google Ads.
Otherwise, you can fall victim to blind optimization and end up chasing metrics that never mattered in the first place.
Not only that, but you can end up burning quite a bit of your advertising budget while chasing your tail as well.
So, let’s make sure that you don’t let Google make important fiscal decisions for your PPC campaigns. If you’re using Enhanced CPC bidding, this post will walk you through how to make the most of your campaigns and how to optimize your budget for maximum ROAS.
If you haven’t yet decided to embrace Enhanced CPC bidding in your Google Ads strategy, this post should hopefully help you decide on what’s best for you and your business.
Calculating & Setting Your CPC (Cost Per Click)
Your cost-per-click (CPC) is a simple calculation. You can simply divide the total cost of your specific ad, ad group, or campaign by the total clicks you’ve generated.
Depending on how granular you want your budget analysis to be, however, you may want to look a bit deeper.
Now, as Google likes to clarify in their CPC definition, the Average CPC adds and averages the actual CPCs of your different live ads. This number, however, can vary from your set Maximum CPC which you will have already set when you first launched your ads.
If you don’t want to go reading through the entire image, I’ll save you some time:
“Once you pass the minimum Ad Rank threshold and qualify for your ad to be shown, you pay the smallest billable unit ($0.01) possible – just enough to beat the competing advertiser with the succeeding Ad Rank after yours.”
*Hint Hint* Your goal should be to get your Average CPC and Actual CPC as low as possible under your Maximum CPC without losing conversion volume or quality. That’s how you maximize your target ROAS.
Now, looking at your average CPC is the hindsight approach. What about setting maximum CPC bids and setting up how your daily budget will be spent? These are things that you can control yourself during the initial setup of your PPC campaigns.
Different CPC Models To Choose From
We can’t start talking about Enhanced CPC bidding without first at least taking a brief look at the other models of bid targeting you can choose from within Google Ads.
- Target CPA (Cost Per Acquisition)
- Target ROAS (Return On Ad Spend)
- Maximize Conversions
- Enhanced CPC (Cost Per Click or eCPC) – Well, hello there 😉
- Maximize Clicks
- Manual CPC Bidding
- Target Search Page Location
- Target Outranking Share
- CPM (Cost Per Thousand Impressions) Bidding
- Viewable Cost Per Thousand Impressions (vCPM) Bidding
- CPV (Cost Per VIew) Bidding
- Target Impressions Share Bidding
Now, each of these bid strategies could warrant their own blog post. We could explain what they do, how each is unique, and how they play to different optimization strengths and work to increase different core campaign KPIs.
But we’ll save that for another day.
For now, we’ll be focusing on eCPC (Enhanced CPC bidding) and what it can mean for your campaigns.
Let’s take a look at how Enhanced CPC aims to help you make more out of your most high-potential search queries. Then we’ll take a look at whether or not it actually beats out your other options like Manual CPC bidding when it comes to lower costs and better ROI.
How Enhanced CPC Bidding Works
For the bare bones definition of how Enhanced CPC bidding works, we can take a look at what the folks over at AdEspresso say:
“In a few words, when you use Smart Bidding (the other name for Enhanced CPC Bidding), you give Google the right to increase or decrease your bid amount based on the likelihood of driving the sale. Bids will try to be averaged out at your max cost per click settings.”
Notice the key phrase in that quote: “you give Google the right to…”
Giving Control To Google
When you set up Enhanced CPC Bidding, you’re giving Google the power to automatically adjust how much you’re bidding on any keywords within that campaign. So make sure that you’re prepared to relinquish at least a little bit of control over how much you’re spending on each keyword.
How much control, you ask?
Well, it used to be that it was capped at 30%, but now even that’s out the window.
That’s right, Google can increase your bids without discretion (or decrease them for that matter) depending on the search volume, competition, and overall difficulty of a keyword that will help their algorithm determine the likelihood of your audience converting on your ad.
Their only goal is to make sure your final average CPC comes in under your max CPC bid. The end goal here is to completely automate your bid adjustments. This way you can sit back and relax.
If Google deems it more likely that your ads will convert a clicker by increasing your bid and guaranteeing your ad placement, it will go ahead and boost the bid to increase your visibility.
So, seeing how eCPC bidding actually hands over control over your PPC bid strategies to Google, what exactly are the pros of this automated bidding strategy? Well, let’s take a look.
The Case For Using Enhanced CPC Vs Manual CPC Bidding
If you haven’t caught on by now, we kind of prefer Manual CPC bidding strategies here at KlientBoost.
We built a model of success based on granularity, organization, and cleanly sliced ad targeting that allows us to isolate a 1:1 keyword:search term ratio to maximize relevancy, CTRs, and conversions.
So, it’s only natural that we would want to apply the same logic of simplicity and granularity to other aspects of our PPC optimization efforts.
However, that doesn’t mean that there’s no merit to Enhanced CPC. And there are surely plenty of paid advertisers making use of the automated bid strategy as we speak.
In fact, the more conversion volume you have, the stronger the Enhanced CPC algorithm actually becomes. Google even goes as far as to set up a minimum conversion threshold per unit you’re required to hit before any Smart Campaign is launched:
- 400 conversions per conversion type with a path length of 2+ interactions (i.e. 400 conversions for a specific goal or transaction, not a sum of 400 over all conversion types)
- 10,000 paths in the selected reporting view (roughly equivalent to 10,000 users, although a single user may generate multiple paths)
Case Study: Is Enhanced CPC Bidding Really More Cost Effective?
Here’s where things get interesting. Thanks to some research performed by the folks over at Ignite, we know that the main issue that we run into when calculating the cost effectiveness of Enhanced CPC bidding is your actual max monthly budget.
While Google says they aim to come in under your maximum CPC, the fact is that these bid automations will (mostly) boost bids and visibility for keywords that generate clicks, not necessarily revenue.
This means that you can very easily come in over your ad spend budget while coming in far, far under your conversion and revenue goals. And those are some percentage points that can seriously cost you at the end of the quarter.
The pros and cons chart below comparing manual versus enhanced may not emphasize the importance of the cons section quite enough…
You not only have to take the above into consideration. You also have to think about how an Enhanced CPC bid strategy might affect your users and customers.
Depending on what Google determines to be your ideal search term opportunities, you may end up overloading certain members of your audience and accidentally ignoring others.
Manual CPC bid strategies give you more visibility into your campaigns. You’ll also get more hands-on control of the setup, bid strategies, and optimization efforts.
Is Enhanced CPC Right For Your Business?
In the end, it’s going to take a nuanced understanding of your campaigns and their inner workings to make the right decision about Enhanced CPC.
It may take a bit of extra setup initially. And it can even make optimization a bit of a monotonous mess at times. But overall, the level of organized segmentation that manual CPC bidding offers and the absolute control you have over your budget that it offers is pretty hard to beat.
Even with all the improvements of Enhanced CPC bidding over the years, the primary benefit it offers is loose budget optimization across broad-scale campaigns.
“And, while certain optimization strategies can be prioritized based on their impact and investment, it’s unwise to make budgetary decisions and relinquish control over your own bid settings for the sake of ease and automation.”
It’s your money at the end of the day. Don’t you want the last say with when you double down your bids? I know I would…