Google Ads has an auction system in place where the advertisers place bids on their preferred keywords. After examining the bid competitiveness and quality score, Google decides the ad position for every advertiser.
Understanding bids and bid management is essential because low bids aren’t accepted, even with a good quality score. And if you are bidding too much for better positions, it may drain out your budget faster. So, having a bid strategy in place is crucial to ensure that what you are paying is worth it.
AdWords offer multiple bid options under two categories: Manual and Automated. These options allow you to optimize the ad campaign budget on the basis of your goals and industry.
In the manual bidding option, you can set the maximum amount you want to pay for every click for the targeted keyword.
Automated bidding, also called smart bidding, comes with plenty of further options to automate your bidding process on the basis of Google algorithms and calculate the right CPC for you.
Following options are available under automated bidding:
Target CPA: Specifying the amount you can pay to drive results.
Target ROAS: It is similar to ROI, where you specify your expected return on ad spend.
Maximize clicks: When you want Google to bring your site as many clicks as possible.
Maximize conversions: When you want Google to bring you maximum conversion, not just clicks.
Target search page location: Setting the expected position in SERP and telling Google to optimize the cost.
Target outranking share: Sharing how often you want to beat the competitors in the ranking.
Enhanced CPC: Optimization of CPC for conversion.
In the manual method, you decide what you want to do. In an automated method, you share your expectations with Google and tell it to optimize accordingly.