What are the best real-time bid strategies

Google's automatic bid strategies in detail: Target ROAS

Now, butter for the fish: In addition to the target CPA, the target ROAS is probably the most important automatic bid strategy in Google Ads when it comes to profit maximization. Why why why? Our series of articles on Google's Smart Bidding Options have the answers.

ROAS - what does that mean again?

Before we get down to the nitty-gritty, let's briefly refresh the most important basics. The ROAS may be one of the most important key figures in online marketing, but nonetheless we find out time and again that many people don't really know what the term actually means. This is essential in order to be able to apply the bid strategy correctly.
So what does the term mean? The acronym ROAS stands for Return on Advertising Spend, which means: You can use this key figure to determine the profitability of your advertising measures. For this purpose, the advertising expenditure of the individual campaigns is compared with the sales generated from them. The calculation looks like this:

ROAS = (sales / advertising costs) x 100

But how high does the ROAS have to be for the advertising measures to be considered profitable? Let's look at an example to clarify. Let's say you spend $ 1,000 on a Google Ads campaign that generates a total of 50 conversions. Through the conversions, you generate a turnover of 5,000 euros, i.e. an average of 100 euros per conversion. The ROAS is thus 500%. If you manage to achieve the same turnover with advertising costs of only 500 euros, the ROAS is 1,000%. The higher the value, the more successful your measure is to be assessed.
Of course, that's only half the story. Sales and advertising costs are isolated from other costs such as B. considered personnel or production costs. Under certain circumstances, the average turnover per customer must be more than 100 euros in order for the advertising investments to pay off and the company to operate profitably.

How does the target ROAS work in Google Ads?

The Target ROAS option is available in Google Ads for Search, Display, and Shopping campaigns. You can select the bid strategy both at the campaign level and across multiple campaigns at the portfolio level. Whether at campaign or portfolio level - by specifying a percentage you determine how much revenue you are aiming for per ad click. The aim of this automatic bid strategy is therefore to get the highest possible conversion value within the scope of the target ROAS.

Decide on a realistic target ROAS. Orientate yourself to the value that Google suggests on the basis of the existing data.

The Google algorithm then regulates the bids for the ad auction according to the set target value. As with the other bid strategies, the algorithm processes up to 200 user signals in real time and of course also takes historical conversion data into account. In contrast to the target CPA, however, it must be able to make statements not only about the conversion probability, but also about the likely conversion value to be achieved. For this to work well, there should be a sufficiently large database. Google recommends only using this strategy if at least 20 conversions have been recorded in the last 30 days - not for the account, but in the respective campaign or campaign portfolio. 50 conversions would be even better.

Best Practices for Target ROAS

Basically, the target ROAS must be realistic. For starters, it is advisable to use the ROAS recommended by Google as a guide. If this value deviates significantly from your own ideas, you should adjust it gradually. It is most promising to proceed in the smallest possible steps and to change the target ROAS by no more than 20%. Otherwise it can quickly become expensive and the performance may drop significantly. You should also give the algorithm enough time to learn, i.e. wait at least one to two weeks before making the next adjustment. As with the other smart bidding options, patience is required when it comes to optimizing performance.
It should also be noted that with this strategy you cannot manually influence the bids in any way. As soon as you switch a campaign to target ROAS, all existing bid adjustments for devices, locations, times of day or demographics are overwritten. Only a bid adjustment for devices by -100% is possible with this strategy. This completely deactivates the delivery of advertisements on certain devices, which can be quite useful for smart TVs, for example.
If you find that your competition is bidding more aggressively and you are losing sales as a result, you only have the option of lowering the target ROAS. This signals to Google that you are ready to spend more on a click on an ad. The algorithm then increases the bids accordingly.