How Value-Based Bidding Works in Google Ads

Introduction to Value-Based Bidding

Value-based bidding is a powerful approach in Google Ads that allows advertisers to optimize their campaigns based on the actual value each conversion brings to their business. By assigning different values to different types of conversions, advertisers can prioritize and bid more aggressively for high-value conversions while still capturing lower-value conversions at a lower cost. This strategy helps maximize the return on investment (ROI) and ensures that the advertising budget is allocated effectively.

The importance of assigning conversion values lies in the fact that not all conversions are equal. For example, a purchase conversion may be worth more to a business than a newsletter sign-up. By differentiating the values, advertisers can guide Google Ads to make more informed bidding decisions and prioritize the conversions that contribute the most to their bottom line.

Setting Conversion Values

To implement value-based bidding, advertisers need to assign monetary values to different types of conversions. This process involves determining the average value each conversion type brings to the business. For instance, if a product has an average order value of $100 and a 20% profit margin, the conversion value would be $20. Similarly, a newsletter sign-up might be assigned a lower value, such as $5, based on the average lifetime value of a subscriber.

Assigning accurate conversion values is crucial for the success of value-based bidding. It ensures that Google Ads can make informed decisions and optimize bids based on the true value of each conversion.

Utilizing Smart Bidding Strategies

Google Ads offers various smart bidding strategies that leverage machine learning to optimize bids based on conversion values. One such strategy is "Maximize Conversion Value," which automatically sets bids to maximize the total conversion value within the given budget. This strategy takes into account the assigned conversion values and aims to generate the highest possible return.

By utilizing smart bidding strategies like Maximize Conversion Value, advertisers can automate the bidding process and let Google Ads make real-time adjustments based on the likelihood of a high-value conversion. This approach saves time and effort while optimizing for the most valuable conversions.

Providing Conversion Data

For value-based bidding to work effectively, it's essential to feed accurate conversion data back to Google Ads. This means properly tracking and reporting conversions, along with their corresponding values, through conversion tracking or offline conversion import.

Advertisers should ensure that their conversion tracking is set up correctly and that the conversion values are accurately passed to Google Ads. This data helps the system learn and optimize bids based on the actual value generated.

Implementation in Different Campaign Types

Value-based bidding can be applied to various campaign types in Google Ads, including Search, Display, and Video Action campaigns. In the case of Video Action campaigns, advertisers can assign values to specific actions like purchases or sign-ups that occur after a user interacts with a video ad.

For example, if a user watches a video ad and then makes a purchase worth $50, the advertiser can assign that conversion a value of $50. Google Ads will then use this data to optimize bids and ad placements to maximize the total conversion value generated from the Video Action campaign.

Setting Up Value-Based Bidding in Google Ads

Step 1: Setting Up Conversion Tracking

To begin with value-based bidding, you first need to set up conversion tracking in your Google Ads account. This involves the following steps:

1. Navigate to the "Tools & Settings" menu and select "Conversions."
2. Click on the "+" button to create a new conversion action.
3. Choose the conversion source (e.g., website, app, phone calls) and provide the necessary details.
4. Install the conversion tracking tag on your website or app to start tracking conversions.

Ensure that the conversion tracking is properly configured and accurately capturing the desired conversion events.

Step 2: Assigning Conversion Values

Once conversion tracking is set up, you need to assign values to each conversion action. Here's how:

1. Go to the "Conversions" section in your Google Ads account.
2. Click on the conversion action you want to assign a value to.
3. In the "Value" section, select "Use different values for each conversion" or "Use the same value for each conversion" depending on your preference.
4. Enter the appropriate conversion values based on your business data and the average value each conversion brings.
5. Save your changes.

Remember to assign realistic and accurate conversion values to ensure effective optimization.

Step 3: Choosing a Smart Bidding Strategy

To leverage value-based bidding, you need to select a compatible smart bidding strategy. Follow these steps:

1. Navigate to the campaign or ad group settings where you want to apply value-based bidding.
2. In the "Bidding" section, click on "Change bid strategy."
3. Select "Maximize Conversion Value" as your bidding strategy.
4. Set your desired target return on ad spend (ROAS) or leave it as "No target" to maximize conversion value without a specific ROAS goal.
5. Save your changes.

Google Ads will now automatically optimize your bids based on the assigned conversion values to maximize the total conversion value.

Step 4: Budgeting and Target Setting

To ensure effective value-based bidding, you need to set appropriate budgets and targets. Consider the following:

• Set a daily budget that aligns with your overall advertising goals and allows for sufficient conversion volume.
• If you have a specific ROAS target, set it realistically based on historical data and business objectives.
• Monitor your campaign's performance regularly and adjust budgets and targets as needed to optimize results.

Advanced Tips for Optimizing Value-Based Bidding

1. Analyzing Performance Data

Why? Reviewing campaign performance data provides valuable insights into which conversions drive the most value, allowing for data-driven optimization decisions.

How?

1. In Google Ads, navigate to the "Campaigns" tab and select the campaign using value-based bidding.
2. Click on the "Segment" button and choose "Conversions" from the dropdown menu.
3. Analyze the "Conv. value" column to identify high-value conversions and their associated ad groups, keywords, or audiences.
4. Use this data to inform bid adjustments and targeting decisions.

2. Adjusting Bids Based on Value Insights

Why? Fine-tuning bids based on conversion value data ensures that you're allocating more of your budget to the highest-value conversions, maximizing your return on ad spend (ROAS).

How?

1. Identify high-value ad groups, keywords, or audiences from your performance analysis.
2. Increase bids for these high-value targets to prioritize them in the auction and capture more valuable conversions.
3. Decrease bids for low-value targets to minimize wasted spend and redirect budget to higher-value opportunities.
4. Monitor performance closely after making bid adjustments to ensure they have the desired impact on conversion value and ROAS.

3. Experimenting with Bid Adjustments

Why? Testing different bid adjustments based on factors like device, location, or time of day can uncover additional opportunities to optimize for conversion value.

How?

1. Identify potential bid adjustment factors relevant to your business, such as mobile devices, geographic locations, or peak conversion hours.
2. Create a draft and experiment in Google Ads to test bid adjustments for these factors.
3. Set up the experiment with a control and test group, applying the desired bid adjustments to the test group.
4. Run the experiment for a sufficient period to gather statistically significant data, then analyze the results to determine if the bid adjustments improved conversion value and ROAS.

4. Leveraging Automated Bidding Features

Why? Google Ads offers automated bidding strategies like Maximize Conversion Value that use machine learning to optimize bids for value in real-time, potentially saving time and improving results.

How?

1. Navigate to the campaign or ad group where you want to apply the automated bidding strategy.
2. Click on the "Settings" tab and scroll down to the "Bidding" section.
3. Select "Change bid strategy" and choose "Maximize Conversion Value" from the dropdown menu.
4. Set a target ROAS if desired, or leave it blank for fully automated optimization.
5. Save the settings and monitor performance, making adjustments to the target ROAS as needed based on results.