Which Type of Automated Bidding Strategy is Target Return on Ad Spend (ROAS)?

You have probably heard that you can improve your reach and, ultimately, your conversion rates by increasing your bids. You probably also have an understanding that this can completely use up your budget. You might even end up spending more than the individual conversions are worth to your company.

A useful metric to make sure you are making effective use of your budget is the return on ad spend (ROAS). Return on ad spend is the percentage of your ad spend that you saw back as revenue. It is also a metric you can target when bidding.

This article will delve into the basics of ROAS and try to answer the following question: Which type of automated bidding strategy is target return on ad spend (ROAS)?

By the way, whatever the bidding strategy are you using you mostly need to select and analyze your keywords in your campaigns. PPCexpo Keyword Planner is such a great tool to find best suited keyword for your campaigns.

How to Calculate ROAS

Before going into which type of automated bidding strategy is target return on ad spend (ROAS), you should be able to calculate ROAS. It is a measure of how much value was generated by each conversion you acquired from your PPC campaign.

Return on ad spend is the ratio of conversion value to advertising spend. It differs from return on investment (ROI), a measure of profits that includes all costs in dollars. ROAS is the total conversion value divided by ad spend and multiplied by 100, and it uses percentage as its unit.

ROAS is calculated as follows:

ROAS = (Revenue / Ad Spend) x 100

So if your campaigns spend $100 to generate $200 in revenue, the ROAS of this campaign is 200%:

$200 / $100 x 100 = 200%

Return on ad spend can be a useful target metric, as targeting ROAS is essentially deciding how much money you want out of Google Ads for the amount you put into Google Ads.

General Knowledge About Target ROAS

Target ROAS is a Smart Bidding strategy, a subcategory of Google Ads’ Automated Bidding strategies. That is the general answer to which type of automated bidding strategy is target return on ad spend (ROAS), but it does not say much on its own.

Smart Bidding is a category of bidding strategies offered by Google Ads that uses auction-time bidding to optimize your input metrics. For target ROAS, Smart Bidding sets the bid based on context clues to try to return you the most conversion value while keeping to your target ROAS.

You can use the target ROAS for singular campaigns or as a campaign portfolio strategy. Using it for a portfolio allows you to maintain a return on ad spend across different campaigns.

Since the target ROAS is optimizing for conversion value, you need to use Google Ads’ conversion tracking for it to work. Conversion tracking is linking your web page and assigning different actions as conversions. You can track sales, as well as app downloads, phone calls, email sign-ups, and many more actionable items your ads might push.

The target ROAS is all about the conversion value, and in the conversion tracking, you can assign a value to each conversion. You want to assign values as accurately as possible because the target ROAS optimizes for conversion value.

By assigning higher values to conversions you want to see more of, the target ROAS will prioritize bidding for these conversions.

The target ROAS bidding uses machine learning to determine its strategy. Therefore, Google Ads limits its use to campaigns with 20 conversions in the past 45 days. If you have trouble meeting this prerequisite, read up on some of the many tricks for optimizing your campaign. The algorithm works best if you have had 50 conversions in the past 30 days.

Similarly, you need to track conversion value for at least six weeks before the target ROAS can run properly.

Knowing which type of automated bidding strategy is target return on ad spend (ROAS) clarifies why giving it a lot of data makes it more effective. Since it is Smart Bidding and it relies on AI, the more data points it has to draw on, the better it will be at its job.

Variables Specific to Target ROAS

Now that you know which type of automated bidding strategy is target return on ad spend (ROAS), you can start looking into the specific details about this bidding strategy. There are several settings that you can control in this type of bidding strategy.

Target ROAS

The Target ROAS is a percentage of revenue you want back for each dollar spent. It is a value over 100 (200 means you want two dollars back for every dollar spent).

You must find the right spot. Setting it too high might yield the right Target ROAS but will not get a high number of conversions. Base your Target ROAS on historical conversion value per cost data to max out your conversion value.

Bid Limits

Bid Limits are self-explanatory. You can set max and min bid limits, which are the most and least you are willing to spend on an individual bid. Again, setting a max bid limit might stop Google Ads from setting bids needed to get you the most conversion value at your budget.

Average Target ROAS

Average Target ROAS is an output that you can view in your bid strategy report. It tells you the average Target ROAS your strategy was actually targeting in a specific period, as opposed to what you set it to target. Looking at this metric at different time ranges can tell you how your campaign is affected by seasonal changes or adjustments to your prices during promotions and other variances.

FAQs

Which type of automated bidding strategy is Target return on ad spend (ROAS)?

Target ROAS comes under a “Revenue-focused Bidding” automated bidding strategy. Choose this bid strategy if you’re tracking the revenue or value associated with your conversions and want to maximize it.

Wrap Up

Now, you should be able to answer the question, “Which type of automated bidding strategy is target return on ad spend (ROAS)?” Hopefully, you can answer a lot more about the target ROAS as well. Using Smart Bidding strategies like this one ensures your campaign is making optimal use of your set budget to eke out as many conversions as you can have.