AdWords: Bidding for Performance

Learning the basics of performance-based bidding

Campaigns are focused around performance, and therefore it is essential to have an understanding of how your bids impact each performance metric.

Conversion rates don't play a huge role in relation to ad position, and therefore it is significant to know the following, as listed of importance by Google:

• Increasing bids generally results in more conversions at a higher average cost-per-acquisition (CPA).
• Decreasing bids generally results in fewer conversions at a lower average CPA.
• Increasing bids while limited by daily budget generally results in fewer conversions at a higher average CPA.

Another crucial aspect is to prioritize your business objectives. While you may have many different goals, tradeoffs are often necessary...

Google wants you to consider managing a campaign with the following objectives:

• Aim for ad positions 1-3
• Maximize profit
• Maximize conversions
• Maximize clicks

You might discover that your most profitable CPC bids come from ad positions that are outside the top three.

Google lists an another example, asking you to consider pairing any of the objectives listed above with the objective below:

• Keep CPA below $10

The CPC bids necessary to keep the CPA below $10 may be lower than the CPC bids that maximize profit, clicks, or preferred ad positions.

Make sure to have a clear business objective so that you know whether your goal is to keep CPA at a certain level or to maximize profit.  If you find that you are having a conflict between the two, decide which one is more important.

An example of how CPA will appear in an AdWords account within the Campaigns tab: