Which Type of Automated Bidding Strategy is Target Cost-Per-Acquisition (CPA)?

This article is going to answer the following question: “Which type of automated bidding strategy is Target Cost-Per-Acquisition (CPA)?” Cost-per-acquisition is another way of saying “the amount you are willing to pay for a customer to take a specific action.”

Target CPA is one of the various Smart Bidding strategies offered by Google Ads. You set how much you want to pay for a conversion, or a target CPA. Google Ads will then set bids at auction-time based to get you as many conversions as possible. It will also ensure that your average CPA is roughly your target CPA. You can either use Target CPA with single campaigns or across multiple campaigns as a portfolio bid.

Automated Bidding

To understand which type of automated bidding strategy is Target Cost-Per-Acquisition (CPA), you should read up on what automated bidding is. It differs in many ways from manual bidding.

Automated bidding uses advanced machine-learning to determine bids at auction time that help meet specific target metrics. These target metrics can include return on ad spend, conversion value, ad placement, and many more (including Target CPA).

Since many automated bidding strategies rely on conversion numbers, you also need to understand and start using conversion tracking for your campaign. Simply put, you cannot pay a cost-per-acquisition if Google Ads does not know when an acquisition happens.

Target CPA Bidding During an Ad Auction

Ad auctions lend themselves naturally to automated bidding like Target CPA.

Ad auctions follow a specific order. First, someone visits a place on the internet that can display Google Ads. Google Ads then narrows down the ads that match the keywords and removes any irrelevant ads. Irrelevant ads might mean ads for something in a different city or a different kind of computer. Then Google Ads determines which ones are most likely to engage the user, known as higher-quality ads. Finally, it displays whichever ad left has the highest bid.

Target CPA bidding will set your bid at the time of auction. If it thinks your ad will convert the user it will try setting the bid to win. Of course, it will only set the bid to win if it can keep within your target CPA. Having too low of a target CPA can limit your ability to win auctions.

Since the actual cost per acquisition can change with time, Target CPA allows you to maintain conversions without continually adjusting your CPA manually. Variations in CPA have to do with your ad and landing page quality, as well as changes to the ad market.

Input Settings for Target CPA Bidding

Knowing the various settings for Target CPA bidding is essential to understand which type of automated bidding strategy is Target Cost-Per-Acquisition (CPA).

Target CPA

The first setting is the eponymous Target CPA. As mentioned, Target CPA is the amount you want to pay for each specific action taken by a target audience member. Setting this too high can make you overpay, but setting it too low will limit the number your ad gets shown. Finding the sweet spot is essential to making the most of your campaign.

Fortunately, Google Ads recommends a Target CPA based on how your ad has been performing. For auctions that are more than a few days old, Google Ads keeps track of your conversion rates to determine the most optimal target CPA.

The reason target CPA recommendations will not use more recent data is because of the potential for false negatives. That is, within the past few days, there could be people who have not converted yet but will.

Include in “Conversions”

Deciding which conversions optimize for is done under the measurements setting, not the bidding settings. You can click on specific conversions and check whether or not to Include in “Conversions.”

By checking the Include in “Conversions” boxes on individual conversions, you are telling Google Ads which conversions to optimize for in Smart Bidding campaigns like Target CPA.

Bid Limits

Bid Limits are available when using portfolio Target CPA strategies for multiple campaigns and only affect search result auctions. You can set the Max. and Min. bid limits, which are exactly what they sound like.

By using these, you might disallow Google Ads from accessing more competitive auctions. That could limit your reach. However, if you know that there is a value that is your absolute upper cutoff for CPA, you should use these. You do not want to pay more than a conversion is worth to you.

Bid Adjustments

Bid adjustments exist for Target CPA, just like they do with manual CPC campaigns. No, this does not mean “manual” is “which type of automated bidding campaign is Target Cost-Per-Acquisition (CPA).”

Bid adjustments are a value modifier. With manual CPC campaigns, the bid adjustment modifies the bid itself based on whatever context the bid adjustment is set to. That means you can set phone advertisements to bump the bid up by some percentage every time.

For Target CPA campaigns, bid adjustments adjust the Target CPA itself. That means that the AI will see a different “goal” when bid adjustments are factored in.

Also, for Target CPA campaigns, bid adjustments can only be set for devices. If you have non-device bid adjustments set, target CPA will just ignore them.

Bid adjustments can be a good way to bid more aggressively on certain platforms you feel have more potential for conversions.

Average Target CPA

Average Target CPA is more of an output setting than an input. It shows you what the actual Target CPA you were going for during a chosen period was. The average Target CPA factors in bid adjustments and changes to your Target CPA over time, so you can see a broader view of your bidding strategy.

FAQs:

What’s smart bidding?

Smart Bidding is a subset of automated bid strategies that use machine learning to optimize for conversions or conversion value in each and every auction. Both historical and contextual data is used to predict the likelihood of conversions.

How does Google automated bidding work?

With automated bidding, Google automatically sets bid amounts based on the possibility that your ad will result in a click or conversion. For this implementation, they analyze data such as a user’s device, operating system, the time of day they are searching, demographics, and location.

Wrap Up

Now, you should have a better understanding of which type of automated bidding strategy is Target Cost-Per-Acquisition (CPA). It is a useful strategy for optimizing conversions at your chosen cost-per-action or cost-per-acquisition. Being able to make use of Smart Bidding strategies like these will efficiently turn your campaign budget into key performance indicators. Use this knowledge well and see your campaigns succeed.