AdWords CPA Bidding
AdWords CPA bidding can be a very powerful feature if used correctly. CPA, or cost per acquisition, is not as different from CPC as some people might think. When using CPA bidding the advertiser is still paying per click. This can be a point of confusion for inexperienced advertisers who believe that they will only be charged for those clicks that lead to conversions.
When using CPA bidding you are setting a target CPA. You are allowing Google to determine which clicks are most likely to lead to conversions and bid accordingly while trying to hit your target CPA. For example, let us assume you have set a target CPA of $25.00. This means for every $25 in clicks you receive you are hoping to receive 1 conversion. Google uses the term acquisition to replace the term conversion but for the purposes of CPA bidding acquisition and conversion are interchangeable.
So you have set a CPA of $25 and now you are allowing Google to bid what it feels is necessary to gain you that conversion for that $25 in clicks. In some cases this may mean bidding $10 for a click and in other cases it may mean bidding only $1. The only limit to your bid amount using CPA bidding is your daily budget. Google will not bid more than your daily budget for a single click.
Google determines how likely an ad spot is to lead to a conversion based on the historical data in your account. This is why you need to have had at least 15 conversions in a 30 day period before your campaign becomes eligible to use CPA bidding. If there is an ad placement that has historically led to a high conversion rate for you Google will bid higher for that placement and bid lower for those placement that have historically led to a lower conversion rate.
Since every ad placement is unique Google bases its bidding on the similarities to your historical data. Time of day, geographic location, and search terms are all metrics that Google uses to determine the likely hood of a conversion for a click on your advertisement. Google has become very good at creating algorithms and with CPA bidding you are able to take advantage of Google’s skill at this.
The most common mistake made when switching to CPA bidding
Earlier I stated that CPA bidding was a very powerful feature if used correctly. There is a mistake that many advertisers make when they first select the CPA option, and every advertiser considers making.
Once a campaign hits 15 conversions inside of 30 days the CPA bidding option becomes available under your campaign settings tab. Once it is available Google will give you a suggested CPA bid. You should ALWAYS start with the suggested CPA bid.
Google determines a suggested CPA bid based on the historic data in your account and is telling you what it thinks it automated bidding system will need to spend on every conversion. If your suggested CPA bid is $50.00 and you change it to $25.00 thinking you will get conversion at half the price you will be in for a rude surprise. Every time I have seen an advertiser try this, their number of conversions has dropped and in many cases conversions disappeared completely. Google is not suggesting a CPA bid high to drive your costs up, it is setting a target CPA it believes it can hit. Google loves making money but it loves being right even more.
Suggested CPA Bid Importance
Start with the suggested CPA bid. In time you will see a steady stream of conversions at or around that cost. Then every couple of weeks or so you can adjust the CPA bid down in small increments and gradually lower your cost per acquisition.
I can’t stress enough how important it is not to try and start off with a CPA bid lower than the suggested amount. I am not saying it cannot work, I am saying I have never seen it work and I have consulted on thousands of AdWords accounts over the last 5 years.
When you first start to optimize your AdWords account you will need to focus on individual bids, geographic bid adjustments, bid adjustments by device, and many other factors. Once you hit 15 conversions in 30 days you can automate all those adjustments through CPA bidding and save yourself a lot of work.