Google Ads Bid Strategies: How They Work and When to Use Them

If you run a small service business, hiring an agency to manage your Google Ads can be pretty expensive.

But that doesn’t mean you should ignore the channel. Google Ads is still the dominant keyword-based ad platform in 2024, and it’s worth learning to use its basic features so you can promote your business — even if you’re not a technical person.

To help you do this, I’m going to break down how and when to use some of the most powerful and effective mechanisms on the Google Ads platform. These mechanisms are Google’s ‘bid strategies.’

What Are Bid Strategies in Google Ads?

Bid strategy = What Google Ads will try to do with the budget you give it.

It determines the relationship between your daily budget and the amount you pay for each click. Understanding which queries (and users) to ‘bid’ highly for — and which ones not to — is critical to managing an efficient, effective campaign that supports your business goals.

The Google Ads algorithm will do this for you. And it will do a very good job of it, too — if you set the right bid strategy and give it the data it needs.

Every Bid Strategy, Explained

Here is what each bid strategy is and does, moving from least sophisticated (no AI or “smart bidding”) to most sophisticated (tell it the return you want and get out of the way… maybe).

They are broadly organized into two categories: manual bidding and smart bidding (with “Enhanced CPC” sort of in-between. It’s semi-automated).

Manual and Semi-Automated Bidding Strategies

Manual CPC (Cost per Click)

You manually set the maximum amount you’re willing to pay for each ‘click’ at the keyword, ad group, or campaign level. Google will not use any of its AI or smart bidding techniques to adjust your bids. It’s on you to increase the max bid amount for higher-value keywords and decrease it for low-performing keywords.

Enhanced CPC

This strategy is like Manual CPC, except Google has some leeway to raise and lower your max bids depending on what’s converting. This was introduced as a precursor to smart bidding that is now being phased out in favour of Google’s more recent advancements.

Smart Bidding Strategies (Focus on These)

Maximize Clicks

Google will generate as many clicks within your monthly budget as its big computer brain can get you. Use this if you a) want to generate as much traffic to your website as possible and b) are less concerned with conversions.

Target Impression Share

This is for ad visibility and, by extension, brand awareness. Tell Google what percentage of potential impressions you want your ad to receive and, if you’ve given it enough budget, you shall receive them — but don’t expect the algorithm to cater to the users most likely to click and buy.

Maximize Conversions

Google will get you as many conversions as possible while maxing out your budget. It values all conversions equally.

⚠️ ENSURE THAT YOUR CONVERSION TRACKING IS SET UP PROPERLY⚠️ Max Conversions and the following three bid strategies will not work without it.

Target CPA (Cost per Action)

This is an add-on to the Max Conversions strategy and the first of two ‘cost caps’ available to you. Here, you can tell Google how much you want to pay for each conversion (e.g., tCPA $20 = one conversion for every $20 in ad spend), and it will attempt to reach or exceed that target.

If the algorithm doesn’t think it can get you conversions at the cost you’re looking for, it will limit your spend as it seeks a better bet.

Max Conversion Value

This is like Max Conversions, but it takes varying conversion values into account. It will bid higher for clicks it suspects will trigger higher value conversions/purchases than for those more likely to achieve a low-value conversion

⚠️ ONLY USE THIS IF YOU HAVE MULTIPLE CONVERSIONS WITH VARYING VALUES ⚠️

Target ROAS (Return on Ad Spend)

This is the conversion VALUE-based cost cap. If you set a tROAS of 300%, Google will cap your spend on bids that aren’t likely to contribute to an overall return of at least 3x your ad spend.

For most of us, tROAS sounds pretty great. Shouldn’t we just tell Google to multiply our ad spend into revenue and be done with it?

Sadly, no. tROAS requires a few different things to work properly: 

1. A way higher budget than you might be comfortable with.
   Google will want to be “unconstrained by budget” on days it thinks it can find you the return… but it won’t always find that return. Especially if the following requirements aren’t met.

2. A ton of prior data from your campaign.
   Don’t start new campaigns on this bid strategy. Ramp them up to it.

3. Good ol’ problem-solution fit.
   These platforms aren’t magic. You need to have a landing page with a compelling enough offer for the real humans clicking through your ads. Sometimes, Google will just scoff at you when you target an unrealistic return (by not spending any of your budget or displaying your ads at all).

How to Make the Cost-Cap Bid Strategies Work for You

In order to ramp up to a successful tCPA or tROAS campaign, you should view the smart bidding strategies as a ladder that starts with Max Clicks and progressively works its way to tCPA or tROAS (and omits Target Impression Share).

Google even has auto-apply recommendation settings that will move your campaign up the ladder for you. Just start your new campaign at Max Clicks or Max Conversions, turn on the auto-apply settings for the more sophisticated bid strategies, and let the AI do its job.

Here are the relevant Auto Apply Recommendation settings in Google Ads that will allow the algorithm to automatically move your campaigns up the ladder of bid strategy sophistication when they have enough data.

You may wish to de-select the “Set a target CPA/ROAS” and “Adjust your CPA/ROAS targets” auto-recommendations and manage those targets yourself. This will ensure Google Ads doesn’t set a value that’s too low for your advertising initiative to remain viable.

But if you’ve followed these steps, given your campaigns time to collect the necessary data, and set up (or hired someone to set up) your conversion tracking before working your way all the way up to a tCPA or tROAS campaign, there’s a good chance you’ll be very pleased with the automated results.

I’ve glossed over some important concepts, such as the Google Ads action, to keep this resource light and easy to reference. If you have any questions — or concepts you’d like to read about in more depth — please let us know in the comments below.

And if you’re looking for a certified Google Ads professional to manage your account for you, please don’t hesitate to reach out. We’d be happy to schedule a free consultation.