What is Smart Bidding in Google Ads? Key Strategies & Examples

Setting the right bidding strategy for your Google Ads can be challenging. Implementing effective Google Ads smart bidding strategies helps minimize wasted ad spend and maximize your budget’s full potential.

Applying an effective bidding strategy is like juggling too many circus balls. It often demands attention and precision, which can be difficult for a novice advertiser or even a seasoned one. 

To tackle this, smart bidding in Google Ads offers an automated bidding strategy powered by Google AI. It helps set realistic targets, improve performance, and save time.

There are four main types of smart bidding strategies in Google Ads :

• Maximize Conversions
• Maximize Conversion Values
• Target CPA (Cost Per Acquisition)
• Target ROAS (Return On Ad Spend)

Each bidding type utilizes conversion tracking to elevate your ad optimization strategy. As the names suggest, they maximize clicks or conversions and help you automate bid adjustments for every auction.

Using smart bidding has resulted in more than 80% of advertisers switching from manual bidding to automated bidding.

To help you get the best, we have curated this guide, which will walk you through the following:

• What is smart bidding
• How to effectively optimize it to get rich outputs
• How to use it to increase revenue or profit
• When to use it & why feeding accurate data is important
• Diving deeper into the four main types of smart bidding

We have also covered some crucial information in the bonus section so that you can stay ahead of the curve.

Let’s dive right in!

Note: Smart bidding is optional to use.

What is Smart Bidding in Google Ads?

In simple words, smart bidding in Google Ads is a special subset of the automated bidding strategy that uses Google AI to optimize ad campaigns to achieve your goals. 

This bidding strategy removes the hassle of constantly tracking and changing every bid adjustment. Instead, it manages it in real-time and analyzes massive data to optimize those bids. 

To do this, smart bidding utilizes auction-time bidding, a real-time automated bidding process. 

Auction-Time Bidding

In Google Ads, auction-time bidding uses machine learning to navigate different data signals to generate more accurate predictions about varied bid amounts.

Let’s explain it in simpler words and more detail:

Instead of applying one bid for everyone, auction-time bidding decides the best bid for each individual and each search at the exact moment.

For example: A thirsty kid searching for “lemonade shop near me” at 3 PM will get higher bids. Meanwhile, a random adult searching for “lemonade shop near me” at 2 AM will get lower bids.

As you can see, auction-time bidding uses a customised per-search approach.

So, the bids depend on the following:

• Location intent
• Time of day & weekday
• Browser, web placement, and site behaviour 
• Devices & operating systems
• Apps
• Interface Language
• Remarketing list
• Actual search query in Search and Shopping
• Search Network partner for Search ads only
• Additional signals & signal combinations exclusive to Smart Bidding
• More

This process plays a crucial role in enhancing bid precision and increasing ROI (return on investment). It works smoothly across various campaigns, including Display, Shopping, Search Ads 360, and YouTube. 

Are Discovery ads the same as Display ads? Find out in our Google Discovery vs Display ads guide.

How Does Smart Bidding in Google Ads Help Advertisers?

Smart bidding has so far proven to simplify auction bidding. The machine learning algorithms consistently work to get the most accurate bids for every individual auction. 

With that, let’s see how you can benefit when you apply it:

1. Advanced Bidding Automation

Right from the start, smart bidding eliminates manual interventions and fully automates your bidding process. With manual bidding, you deal with fewer data signals, whereas smart bidding encompasses vast amounts of data, leading to more precise bidding. 

Think of it this way: Smart bidding is like having a super-smart robot helper that decides how much money to pay for ads each time someone searches on Google.

Instead of you guessing the price (called a “bid”), the robot uses math, data, and past patterns to choose the best price automatically. Normally, if you were buying ads, you’d have to:

• Select a bid (such as $1 for each click).
• Check if it worked.
• Change it again and again.

2. Real-time Bid Adjustments

Real-time bid adjustments factor in location intent, devices, browser, time of day, remarketing list, etc., which helps in making quick adjustments that boost the chances of a conversion happening.

This helps reduce wasted spend and increases your chances of reaching your goals. Smart bidding makes real-time adjustments that are often more accurate and effective than manual bidding.

For example: Using data-driven adjustments, Google may increase bids for previously visited customers, while lowering bids for less valuable traffic.

3. Customizable Bidding Control

Smart Bidding gives you control to align your bidding requirements with your business goals. You can optimize bids based on:

• Your chosen attribution model (a rule that decides which click or ad interaction gets credit for the conversion)
• Set different performance targets for devices like mobile or desktop
• Use built-in tools (like Target ROAS or Target CPA) to guide and maintain your preferred bidding strategies.

Let’s dive deeper with an example:

• For the Attribution Model: An online retail store discovered that their mobile ads gained more clicks, but saw purchases on their desktop ads. So, they use smart bidding to set higher bids on relevant mobile ads, regardless of whether it is the final click. This way, smart bidding does not undervalue the beginning of the customer journey.
  
• For Device Performance Targets: A shoe store found that desktop buyers are more profitable than mobile users, so they opt to set a higher performance target for desktop users than for mobile users. Smart bidding will prioritise desktop users and their searches because the return will be more profitable.
• Using Built-in Tool: Suppose a baby care store uses Target ROAS for its campaign, and sets its goal to 400%. Smart bidding will automatically adjust the bids for every single auction to achieve this goal. It will bid higher for a customer paying $100, and lower for someone who may not convert.

4. Adjust According To Your Goals

Smart Bidding is flexible and can be tailored to your eCommerce goals, whether you want to maximize conversions or hit a target CPA.

For example: An online coffee bean store uses smart bidding and sets Maximize Conversions and Target CPA as its goals.

For Maximize Conversions, the bid will be set higher for that customer who is highly likely to purchase any coffee bean bag.

For Target CPA, smart bidding will adjust bids to maintain the average cost of an order at $10 or below. When a click is for $15, it will not bid as high. This approach will maintain a specific cost for every sale made.

When you set an objective (Maximize Conversions and Target CPA in this case), you inform Google’s system, which automatically adjusts the bid in real-time. This is done for every search to reach the main goal.

Different Types of Smart Bidding Strategies in Google Ads

Smart bidding requires understanding your campaign goal and end goal. This bidding strategy constantly learns and analyses your ad campaign’s performance. To use it effectively, advertisers must understand their requirements in order to pick the right type of smart bidding strategy.

There are mainly four types of smart bidding strategies in Google Ads. These strategies align with your bidding requirements, helping you focus on achieving your primary goal.

Now, the four types of Google Ads Smart Bidding strategies include:

• Target CPA
• Target ROAS
• Maximize Conversions
• Maximize Conversion Value

Let’s learn about each one of them in detail.

1. Target Cost-per-Action (tCPA)

Target CPA is a smart bidding strategy and comes under the automated bidding strategy. This bid tries to get as many conversions or customer actions as possible. It essentially tells Google how much you are willing to pay for ads per sale. Smart bidding then adjusts bids for every single auction in order to help you reach that particular number.

Google Ads uses this bid according to the likelihood of the ad converting. You can apply it as:

• Standard strategy for a single campaign
• Portfolio Strategy
• Multiple campaigns

How do average daily budget and Target CPA work together? The two work together to maintain a balance between spend control and ad performance. The average daily budget controls how much Google’s system can spend while trying to achieve your set Target CPA. When the budget is low, Google may not get enough conversion data to optimize bids. When the budget is sufficient enough, Google’s system can learn from more conversions and optimize bidding to reach the Target CPA.

How Does It Work?

• Google Ads uses historical campaign data and real-time contextual signals to set bids each time your ad is eligible to appear. Meaning, it is easy to predict how much you will spend to get new buyers.
• You avoid spending too much on a single customer.
• The goal is to get as many conversions as possible at or near your target cost-per-action (CPA).
• Some conversions may cost more or less than your target, but Google aims to keep the average CPA close to your set goal.
• Actual CPA can vary due to factors outside Google’s control, such as:
  
  – Website changes
  – Ad updates
  – Shifts in competition
  – Variability in conversion rates

Example: 

Let’s create a scenario. An online book store opts for Target CPA, with the following elements in place:

• Average Daily Budget: $60 – how much an advertiser is spending
• Target CPA: $3 – how much the advertiser is willing to pay for each sale.
• Google aims to achieve 20 sales with a budget of $60, targeting a $3 profit – $60/$3 = 20 sales (on average).
• Keep in mind that not every sale will result in exactly $3. Some may even be cheaper, while some may be more expensive. The average will remain close to $3.

Who should use it? 

• Merchants seeking to maximize conversions at a specific cost per conversion. 
• Merchants with the goal of lead generation or sign-ups and not ROAS or revenue. 
• Those looking to scale efficiently and keeping their acquisition costs stable. 

Recommendations

• Don’t apply bid limits. Google says that it can restrict its automatic bid optimization. This is because bid limits can hinder smart bidding’s ability to bid aggressively when a conversion is likely or to bid lower when a conversion is unlikely. This also hinders its learning process to understand how your
• Bid limits should only be applied in Search Network auctions if you plan on using them. 
• In Google’s terms, your average target CPA is a traffic-weighted figure that reflects what Smart Bidding actually optimized for. It accounts for device bid adjustments, ad group targets, and any changes made over time.
  
  This may differ from your originally set target. For accurate performance evaluation, compare your actual CPA with the average target CPA, and regularly monitor both over time.

Further Reading: How to Resolve Pending Google Ads Account Link Requests? Google Ads Audit: Step-by-Step Guide [Free Template] How to Use Google Ads Auction Insights? How to Run Google Ads

2. Target Return on Ad Spend (ROAS)

Target ROAS uses Google AI to get the best return on the money that you are spending on ads. The focus is on how much revenue is generated for every ad spend. It optimizes bids for conversions that drive revenue instead of the ones that only increase conversion volume. 

This bidding type can be applied to the following:

• Standard strategy for a single campaign
• Portfolio strategy for multiple campaigns

How Does It Work?

• Google Ads predicts future conversions and values using your reported conversion data.
• It sets maximum cost-per-click (CPC) bids to maximize conversion value while aiming to hit your target return on ad spend (ROAS).
• Some conversions may exceed or fall short of your target ROAS, but Google aims to keep the overall average ROAS equal to your set target.
• Google uses AI and real-time signals to optimize performance in every auction.
• After setting up a bid strategy or applying a recommendation, Google may suggest a target ROAS based on recent campaign performance (excluding the last few days to account for delayed conversions).
• You can either accept the recommended ROAS or set your own based on your business goals.

Example: 

Suppose an online clothing store opts for tROAS and has the following values set: 

• Monthly Ad Budget: $10,000 
• Target ROAS (tROAS): Set at 500% (every $1 spent should get $5 in sales)
• Main goal: To generate $50,000 in revenue ($10,000 x $5 = $50,000

The bid will automatically increase for the search “buy women’s woollen sweater online” because the intent is to purchase. The bids will be lower for casual searches like “woollen sweater ideas” because the purpose is not to buy them. 

Who should use it? 

• Merchants with accurate conversion tracking, such as proper value tracking through Google Ads conversion values. 
• Ecommerce stores with varying purchase amounts for different products. 
• Looking for profitable conversions that generate high revenue. 
• Those who have 30-50 conversions produced in the span of one month (30 days). 

Recommendations

• The time frame of the ROAS evaluation should exclude the recent conversion delay period.
• You are allowed to use ad group targets in standard and portfolio bidding strategies. 
• Refrain from using bid limits, as it can hinder Google Ads from AI optimization.
• Bid limits are permitted for Shopping and Search portfolio bid strategies only. 
• Before switching to value-based bidding, start by using a Target CPA (tCPA) strategy aligned with your conversion goals.
• Make sure you’re reporting values across all key campaigns for at least 4 weeks or 3 conversion cycles.

3. Maximize Conversions

Maximize Conversions uses Google AI to set bids that get the most number of conversions while spending your set budget. It automatically adjusts bids and provides auction-time bidding capabilities.

In this, Google’s system allocates how much to bid in every auction so as it gain as many conversions as possible.  

How Does It Work?

• Uses your campaign’s historical data and real-time signals at auction time.
• Applies AI-powered auction-time bidding to find the optimal bid for each impression.
• Aims to get the most conversions possible within your average daily budget.
• Adjusts bids per auction to get the lowest-cost conversions available.
• Check your average daily budget. This strategy tries to spend your daily budget fully. If you’re currently spending much less, expect a potential increase in spend.
• Review your ROI goals. If you have a specific performance goal (e.g., target CPA, ROAS, or CPI), consider using:
  
  – Target CPA or Target ROAS for Search and Shopping campaigns
  – Target CPI (cost-per-install) for app install campaigns

This focuses on hitting your cost or value goals, not just maximizing conversions.

Example

An online fitness store uses Maximize Conversions strategy to sell its gym gear:

• Monthly Budget: $5,000 
• Maximize Conversions: Google uses past performance data: purchases on your website, the time customers shop, devices they use, and their location. 

This strategy is effective for driving conversion volume. Advertisers don’t have to set a target cost per conversion as Google automatically looks after the number of conversions generated within the set $5,000 budget. 

The bid increases for searches like “buy dumb bells” and decreases for low-intent searches, such as “best protein powders.”

Recommendations

• Use tools like the budget simulator and impression share metrics to assess budget opportunities (only when Target CPA or Target ROAS is not set to Maximum Conversions)
• Avoid using the “Lost IS (budget)” column. It’s incompatible with Maximize Conversions.
• Maximize strategies are meant to spend your daily budget fully, so they’re naturally “limited by budget.”

4. Maximize Conversion Value

Maximize Conversion Values aims to get the highest total value within your daily budget, without focusing on return efficiency. This means that Google will focus on getting the most valuable conversions (revenue) instead of the highest number of conversions.

This bidding strategy prioritises total conversion value, even if it leads to higher costs and a lower ROAS. If the option is available, you can set a target ROAS within this strategy to maintain profitability.

How Does It Work?

• This also uses historical data and real-time signals at auction time to set bids.
• It focuses on getting the most valuable conversions while spending your daily budget.
• Review your average daily budget: Without a target ROAS, this strategy will try to spend your budget fully. If the current spend is much lower, expect some increase.
• Check your ROI goals. If you have a specific return target, consider setting a target ROAS within the bidding strategy.

Example:

An online clothing store uses Maximize Conversion Value for its bidding:

• Monthly Budget: $8,000

The online store sells $20 T-shirts and $300 jackets. Google will place people who are likely to buy the jacket with the most bids, while placing lower bids for low-value shoppers who are only surfing your website and not converting.

Instead of 400 T-shirt sales worth $8,000, you might get 100 jacket sales worth $25,000.

Who should use it? 

• Those who are aiming to get the most out of their budget by prioritizing valuable customers over cheaper, low-value conversions.
• Want to focus on total revenue or profit, not just the number of conversions.
• An eCommerce store with both low and high-priced products.

Recommendations

• In Search campaigns, optional target fields are available when setting up Maximize Conversions or Maximize Conversion Value strategies.
• In Video Action campaigns, Maximize Conversions and Maximize Conversion Value are treated as separate bidding strategies.
• If you’re using Maximize Conversion Value without a target ROAS, Google will spend your budget fully to get the highest possible conversion value. If this doesn’t match your goals, you should set a target ROAS to control spend and efficiency.
• When using Maximize Conversion Value with a target ROAS, Google will aim to get the most value possible while hitting your desired ROAS.

Bonus: When to Use Smart Bidding?

A big question comes when advertisers decide when to apply smart bidding in their campaigns. From our analyses, you must have understood that smart bidding is all about automation, which requires rich data to process information and yield beneficial results. So, with that in mind, let’s understand when you can apply smart bidding: 

1. It is the ideal solution for maximizing conversions, sales, and ROAS. Smart bidding should be used for conversion-focused campaigns.
   
2. Google’s suggestion is to club broad match keywords alongside Smart Bidding strategies like target CPA (tCPA) or target ROAS (tROAS) to get high-intent traffic that might be missed when using only exact or phrase match types.
   
   Smart bidding can also handle more complexities than manual bidding can.
   
3. Smart Bidding adapts to changes in competition, device type, or location in real time.
   
4. When your campaigns have gathered sufficient and consistent conversion data, it is recommended that at least 30+ conversions for tCPA and 50+ conversions for tROAS be tracked in the span of 30 days.
   
   The algorithm may not optimize efficiently without rich conversion data. You may also not get accurate results if you haven’t tracked conversions in the past.
   
5. Lastly, smart bidding is also ideal in cases where advertisers use seasonality bid adjustments. Smart bidding’s automation capabilities adapt efficiently with temporary shifts in performance. You can use it in campaigns for Black Friday, Christmas Sales, Cyber Monday, etc.

Conclusion

Smart bidding offers a powerful approach in tracking your ad campaigns and helping in maximizing the performance of your Google Ads campaigns. 

It helps you stay ahead of the competition by offering smarter solutions to your bidding strategies. With that, here are the key takeaways from the blog: 

• Setting the right bidding strategy helps reduce wasted ad spend and optimize budgets for better performance.
  
• Smart Bidding is an automated Google Ads strategy powered by AI to optimize bids in real-time.
  
• It helps advertisers save time, set realistic goals, and improve ad performance without constant manual adjustments.
  
• Four main Smart Bidding types: Maximize Conversions, Maximize Conversion Value, Target CPA, and Target ROAS.
  
• Smart Bidding uses auction-time bidding to adjust bids per individual search based on multiple signals such as location, device, time, and user intent.
  
• Over 80% of advertisers have switched from manual to automated bidding due to its precision and effectiveness.
  
• It works across Search, Shopping, Display, and YouTube campaigns.
  
• Smart Bidding analyzes vast data to predict which clicks are more likely to convert and bids accordingly.
  
• Benefits include automated adjustments, higher bid precision, and improved ROI.
  
• Advertisers can customize settings to align with business goals using tools like Target ROAS and Target CPA.
  
• Target CPA focuses on acquiring conversions at or near a set cost per acquisition.
  
• Target ROAS aims to maximize revenue for every dollar spent by predicting conversion value.
  
• Maximize Conversions seeks to generate the highest number of conversions within the given budget.
  
• Maximize Conversion Value focuses on generating the highest total conversion value, prioritizing revenue over volume.
  
• Bid limits can restrict AI optimization and should be avoided unless necessary.
  
• Smart Bidding performs best when accurate and sufficient conversion data is provided (at least 30+ conversions for tCPA and 50+ for tROAS).
  
• It adapts automatically to market fluctuations, user behavior, device differences, and competition changes.
  
• Ideal for campaigns focused on conversions, sales, or revenue growth.
  
• Works effectively with broad match keywords for capturing high-intent traffic.
  
• Smart Bidding is highly suitable for seasonal campaigns like Black Friday or Christmas due to adaptive automation.

FAQs

What is the difference between smart bidding and manual bidding?
Smart Bidding uses Google’s AI (machine learning) to automatically adjust bids in real time to maximize conversions or ROAS, based on data retrieved from like device, location, and intent.

Manual Bidding lets advertisers set their own bids for full control, but it requires more time and doesn’t optimize automatically.

How do I turn on smart bidding?
First log in to your account and go to the campaign you want to edit > in the left-hand menu, click Settings and then Bidding > Change bid strategy and select a Smart Bidding option: Maximize Conversions, Target CPA, Maximize Conversion Value, or Target ROAS > if needed, enter your target CPA or ROAS or adjust other settings >  click Save. 

What’s the difference between automated bidding and smart bidding? 
Automated bidding is a broad category where Google sets bids for you, including strategies like Maximize Clicks or Target Impression Share.
On the other hand, smart Bidding is a type of automated bidding focused only on maximizing conversions or conversion value using machine learning. It offers four strategies: tCPA, tROAS, Maximize Conversions, and Maximize Conversion Value.

What is the meaning of portfolio bid strategy? 
A portfolio bid strategy is when you apply one bidding strategy across multiple campaigns, ad groups, or keywords instead of just one campaign. It lets Google optimize bids across all of them together, helping you reach your goals, like tCPA or tROAS, more efficiently than managing each campaign separately.

Do I lose control when using Smart Bidding?
You still have some control, but not entirely. Google decides bids automatically at auction time, so you cannot set exact CPCs for each keyword. However, you still control budgets, targets like CPA or ROAS, bid limits, campaign structure, keywords, ads, and audiences, which help train the algorithms.

Do I need a lot of data to start using Smart Bidding?
The answer is that you don’t need to have a lot of data at all times. For goal-based strategies like Target CPA or Target ROAS, it’s best to have at least 30 to 50 conversions, respectively, in the past 30 days so the algorithm has enough data to optimize. Otherwise for some Smart Bidding strategies like Maximize Conversions or Maximize Conversion Value can start with very little data. 

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