Smart Bidding: What It Is, When to Use It + 5 Proven Strategies

Smart Bidding harnesses machine learning to optimize your bids in Google Ads auctions in real-time. By considering contextual signals and your conversion goals, Smart Bidding can improve campaign performance — but only if you know when to use it.

Do manual bid adjustments eat up too much time in your digital marketing strategy? For some campaigns, it might be time for Google’s advanced machine algorithms to take the wheel.

Enter: Smart Bidding.

Dorsa Aerabi, a paid media expert and marketing manager here at HawkSEM, walks us through what Smart Bidding is, when it offers the highest return on investment (ROI), and her expert advice on the Smart Bidding process.

What is Smart Bidding?

Smart Bidding is a collection of bidding strategies on Google Ads that use artificial intelligence (AI), specifically machine learning algorithms, to inform your bid adjustments in real-time.

Sometimes referred to as “auction-time bidding,” Smart Bidding aims to achieve one of two broad business goals:

• Improve the quantity of conversions
• Improve the quality of conversions

Google’s algorithms assess historical data from your previous campaigns as well as audience data subsets to deliver the best possible bid value for your campaigns.

The best part? Smart Bidding is automated, meaning all this work happens behind the scenes without adjusting the bids yourself.

How does Smart Bidding work?

Google uses contextual signals — like device, browser, time of day, location, past performance, and user behavior — to predict how likely a click is to lead to a conversion.

Other examples of contextual signals include:

• Seasonality: Specific times of the year, like the holidays
• Price competitiveness: Adjustments based on how your price stacks up against competitors
• Website behavior: A potential customer’s browsing history, including previous visits to specific web pages
• Ad placement: Higher bids for audiences that see search ads on specific, higher-traffic, or conversion-heavy websites
• Location: Covers audiences’ physical locations as well as location intent within a search query

With this data, Google automatically adjusts your bid in real-time for each auction to help you hit your specified goals.

Smart Bidding saves advertisers from monitoring and adjusting bids manually. (Image: Adobe)

Benefits of Smart Bidding

There is a long list of benefits when it comes to Smart Bidding to achieve your campaign goals:

1. Bid optimizations in real-time

Advanced machine learning allows Smart Bidding strategies to adjust your bids at the exact moment of an auction — considering factors like device, location, and time of day.

2. Saves time

Smart Bidding saves advertisers from monitoring and adjusting bids manually. Instead, you can focus on the larger strategy at hand.

3. Goal-based performance

Choose specific goals for your campaign and Smart Bidding will focus its efforts on making them come to life.

4. Understanding more complex signals

Smart Bidding can manage more complex signals, like browser type — something that’s harder for humans to do.

5. Scalability

As campaigns grow, Smart Bidding makes it easier to maintain efficiency and scalability.

When to use Smart Bidding

Aerabi recommends using Smart Bidding under the following ideal conditions:

1. When you have enough conversion history
2. When you have a generous daily budget
3. With exact-match keywords
4. With A/B testing insights on your audience

1. When you have enough conversion history

“For newer businesses or those new to Google Ads, it’s best to start with manual bidding to gather sufficient conversion data,” says Aerabi.

“As your campaign gains more conversions and learnings, this is where we consider transitioning to Smart Bidding for better automated optimization.”

Google recommends Smart Bidding for campaigns with a history of at least 30 conversions within the past month, ideally 50 for the target ROAS strategy.

But if you work with a skilled, seasoned Google Ads agency like HawkSEM? Aerabi can work with much less:

“Generally speaking, if I see five to ten conversions within one month, I think that is a good time to opt into Smart Bidding,” she says.

Keeping a close eye on bidding performance, historical data, and competition can help mitigate wasted ad spend. (Image: Adobe)

2. When you have a generous daily budget

The Maximize Conversion Value bid strategy offers great ROI potential. But Google’s algorithms have a tendency to be too aggressive too soon.

That’s why we’d recommend a budget of $10,000-$15,000 per month before starting a Smart Bidding strategy. Still, you want to trade as much ROI as possible for those marketing dollars.

Aerabi says keeping a close eye on bidding performance, historical data, and competition can help mitigate wasted ad spend:

“We recommend starting off with a manual bidding strategy for businesses on a budget and based on the client’s goals, performance, data, and competition,” says Aerabi.

“We make an informed decision on whether or not it makes sense to test Smart Bidding.”

3. With exact-match keywords

If you’ve kept up with Google’s instructional content and tips articles, you might remember an article that favored broad-match keywords for Smart Bidding over exact-match. In Google’s words:

“Broad match gives you the most reach and conversions within your goals.”

Aerabi elaborates:

“Broad match with Smart Bidding [can] leverage the algorithm’s flexibility in identifying relevant searches and adjusting bids accordingly,” says Aerabi.

Eager to take Google’s advice, 62% of brands now use broad match for Smart Bidding campaigns.

“Introducing exact match keywords with Smart Bidding is one of the best strategies I have seen work, especially when you want to drive relevant traffic and have more control of keyword targeting and what search terms will look like,” says Aerabi.

4. With A/B testing insights on your audience

While you can gather audience data from Smart Bidding by looking at conversion rates and details, it’s not an ideal approach:

“I don’t believe it’s designed to give data in this way since it optimizes bids based on historical data and not so much on demographic information,” says Aerabi.

Plus, you’ll find yourself spending serious coin. The solution? Aerabi prefers A/B testing and leveraging Google Ads’ observation mode:

“A/B test different messaging to see what resonates best with your audience, or even implement tailored messaging for specific ad groups,” says Aerabi.

“Additionally, using observation mode for in-market or affinity audiences in your campaigns can help provide insightful data on how these groups engage with your ads, without narrowing your reach.”

Google Ads Smart Bidding can increase the number and quality of your conversions. (Image: Adobe)

But here’s the kicker: your audience doesn’t exhibit the same behavior across every marketing platform. So, how do you create a marketing strategy that accounts for optimized tactics across every platform?

On top of extensive audience research, HawkSEM strategists turn to our proprietary tech, ConversionIQ.

Its AI-generated insights and comprehensive analysis help us gather data for way more than a single group of Google Ads campaigns. It also feeds us data across customizable historical periods from multiple campaigns and marketing channels.

Ultimately, you’ll want to tailor your Smart Bidding efforts with the marketing objectives that mean the most to your brand. This is where Google’s Smart Bidding strategies play a crucial role.

5 types of Smart Bidding strategies

As mentioned earlier, Google Ads Smart Bidding can increase the number and quality of your conversions. But these results hinge on the type of strategy you select when you set up your Google Ads campaigns.

These five Smart Bidding strategies focus on different objectives, honing in on the goals you want to prioritize.

We’ll also briefly cover two more automated bidding strategies that Aerabi uses in her paid search strategies. They’re similar to Smart Bidding strategies but technically don’t use auction-time bidding.

1. Maximize conversions
2. Target CPA
3. Target Return on Ad Spend (ROAS)
4. Maximize conversion value
5. Automated bidding strategies

1. Maximize conversions

Looking to pump up your leads and sales? Aerabi says this bidding method is your go-to:

“If there is budget flexibility and a goal to drive as many conversions as possible, we like to recommend starting with this bidding strategy.”

The Maximize Conversions strategy leverages historical campaign performance and audience signals to adjust bid amounts for the highest number of conversions possible with your given budget.

You can also tweak this strategy to optimize for as many conversions as possible with a target cost per action (CPA).

Otherwise, the Smart Bidding algorithm will work with your ad budget.

2. Target CPA

Maybe you have conversions coming in, but they take a serious toll on your marketing budget. If your CPA is too high, you’ll spend a disproportionate amount of your budget on leads and conversions.

With the target CPA strategy, Google Ads works its magic to deliver customer actions (web visits, completed lead forms, purchases) within your target CPA.

Let’s say you currently pay an average of $25 per conversion, but you want to bring it down to $15. You’d set your target CPA to $15, and Google’s algorithms would work to get you conversions with that CPA as often as possible.

Some criteria the algorithms assess include time of day, location, browser, device, and remarketing lists.

Another bonus? You can implement this strategy for one specific campaign, multiple campaigns, or a portfolio of campaign groups, depending on your budget and marketing needs.

3. Target Return on Ad Spend (ROAS)

Imagine you spend an average of about $100 for five conversions, which garner a total of $500 in revenue. In that case, your ROAS is 500%. Pretty sweet, right?

If you want to maintain those numbers, opt for the Target ROAS strategy. This way, Google will prioritize targets and set bids that generate a similar return.

But Google can’t make these predictions without enough data to work with. Meaning?

You need a history of 10-30 conversions with accompanying values within the last 7-30 days for Google’s algorithms to investigate.

If you’re brand new to Google Ads, this strategy might not deliver the ROAS target you’re after because of insufficient data to inform bid choices.

4. Maximize Conversion Value

Consider two potential customers who see your ad: One might have certain signals similar to higher-value customers that make higher purchase orders or return purchases.

The other could be a serial browser. Similarly, you might place more value on a customer with a mobile device than a desktop, if the former is more consistent with your audience.

In the Maximize Conversion Value strategy, Google will assess audience signals like device, location, and shopping behavior.

Moreover, it’ll account for your brand’s input and conversion values to bid higher on predicted higher-value conversions and lower on lower-value conversions. You can also place set values on different types of conversions and have Google target them.

5. Automated bidding strategies

It’s easy to hone in on conversions and value in your paid search strategy. After all, who doesn’t want increased revenue and ROI? But a huge part of getting that revenue lies in brand awareness and niche authority.

This explains why our clients invest in SEO services to create informational, accurate, and authoritative content. The idea is to position themselves as reliable industry leaders to their audiences.

If you want to build brand awareness, you need to attract more people to your website. And that doesn’t always lead to a purchase. But it does set the stage for more conversions in the funnel down the line.

Here are Google’s two automated bidding strategies focused on brand awareness:

Target Impression Share

The Target Impression Share strategy adjusts bids to prioritize top SERP ad placement for specific keywords. If you struggle in a competitive niche and lose traffic to big competitors, Aerabi says this could be a useful strategy:

“In scenarios where a branded keyword faces significant competition, exploring Target Impression Share can be beneficial,” explains Aerabi.

“This strategy aims to maximize ad impressions for the brand keyword, enhancing brand visibility and securing top ad placements.”

Then comes the power of clicks.

Maximize Clicks

Wondering how to supercharge clicks from your Google Ads account? The Maximize Clicks strategy lives up to its name. It focuses on maximal clicks for old and new campaigns within your given budget.

If you struggle with high cost-per-click (CPC) in your industry, this strategy can help you breathe a sigh of relief. Google sets maximum CPCs on your behalf so you can reap the clicks without blowing through ad spend.

Just remember: if your audience is more active at certain times of day or year, you can’t target them with that info through the Maximize Clicks strategy.

Smart Bidding Exploration: Google’s latest update

Smart Bidding Exploration is Google Ads’ newest feature that helps advertisers capture additional, high-value traffic — without changing your keywords, increasing your spend, or changing campaign structure.

Instead, Google uses its AI capabilities to test and explore new traffic opportunities by allowing more flexibility.

In other words, advertisers who use this feature give Google permission to show their ads in places they weren’t previously.

When to use Smart Bidding Exploration

Smart Bidding Exploration is still in beta, but is currently available for any campaigns using tROAS.

The bad news? It may result in a lower ROAS (i.e., lower profitability per conversion) because it “bids more aggressively on search terms you’re eligible for but normally wouldn’t win,” according to Adriaan Dekker.

The good news? It has the potential to increase your overall revenue and net profit by diversifying your traffic.

But proceed with caution — we only recommend those with extra budget who also need additional areas of growth consider Smart Bidding Exploration right now.

The takeaway

Smart Bidding works best for ads backed with proper conversion tracking, A/B testing insights, flexible budgets, and exact-match keywords.

At HawkSEM, we don’t leave ROI to chance for any single campaign. When you partner with us, you join a roster of booming brands in finance, SaaS, ecommerce, and other niches, raking in an average of 4.5X ROI.

Our formula for success? Google Premier Partner status, a dedicated staff of PPC experts, and exclusive access to performance metrics from ConversionIQ.

Curious how we’d harness Smart Bidding to up your marketing game? Let’s talk.

This article has been updated and was originally published in February 2024.