How Value-based bidding works

Using conversion tracking, Google Ads predicts future conversions and their associated values based on your reported conversion values. Based on this data, Google Ads sets maximum cost-per-interaction (max. CPC) bids to maximize your conversion value while aiming for an average return on ad spend (ROAS) equal to your target.

Although individual conversions may yield higher or lower ROAS, Google Ads strives to maintain an overall conversion value per cost aligned with your target ROAS. When you set a target ROAS of 500%, Google Ads will adjust your bids to maximize conversion value while reaching this target. Real-time signals such as device, browser, location, and time of day are taken into account to enhance performance in the ad auction. Additionally, AI algorithms adjust bids based on whether a user belongs to one of your remarketing lists.

After creating a new bid strategy or selecting an optimization score recommendation, Google Ads recommends a target ROAS value. Based on your actual ROAS over the past few weeks, recent performance is excluded to account for conversions that may take more than a day to complete (e.g., engaged views). You have the option to either use the recommended target ROAS value or set your own according to your preferences.

By utilizing these capabilities, Google Ads aims to optimize your bidding strategy to maximize conversion value while striving to achieve your target ROAS.

More in the video Google Ads Tutorials: Best Practices to implement value based bidding in Search

Bid adjustments and Target ROAS

Bid adjustments control the frequency at which your ads are displayed based on factors such as search location, time, and user behavior. You can still apply device bid adjustments of -100% when utilizing Target ROAS to optimize your bids using real-time data, except when using Target ROAS to optimize your bids using real-time data.

Target ROAS bidding focuses on maximizing your return on ad spend (ROAS) by dynamically optimizing bids based on real-time insights. Instead of relying on predefined bid adjustments, this bidding strategy leverages real-time data to make informed bidding decisions. Consequently, your existing bid adjustments, apart from device bid adjustments, are not taken into consideration.

Device bid adjustments, which allow you to modify bids based on specific devices, are still applicable in Target ROAS bidding. You retain the option to set device bid adjustments of -100% if you wish to completely exclude certain devices from displaying your ads.

With Target ROAS bidding, real-time data optimization supersedes traditional bid adjustments, except you can still use device bid adjustments to exclude specific devices from your ads.

Create a new bid strategy

You have the option to create a Target ROAS bid strategy for either a single campaign (standard strategy) or multiple campaigns (portfolio bid strategy) through the following methods:

  • Create a new campaign and set up the bid strategy.
  • Adjust the bid strategy from the campaign settings or create a new one.
  • Generate the bid strategy from the ‚Bid strategies‘ section in the Shared library.

To create a bid strategy, refer to the Set up Smart Bidding guidelines.


Target ROAS

Your target ROAS represents the desired average conversion value (e.g., revenue) you aim to achieve for each dollar spent on ads. It’s important to note that setting a high target ROAS may limit your ad traffic, potentially affecting your conversion volume.

Consider the following tips when setting your target ROAS:

  • Utilize recommended targets provided in areas such as the Recommendations page within your account. These recommendations consider your historical performance, taking conversion delays into account.
  • Determine your target ROAS based on the historical data of conversion value per cost for the campaigns you wish to apply the strategy to. This approach helps maximize your conversion value while maintaining the same return on ad spend. Remember to factor in conversion delays as well.
  • To access your historical conversion value per cost data, select ‚Modify columns‘ from the ‚Columns‘ dropdown and add the ‚Conv. value/cost‘ column from the list of „Conversions“ columns. Multiply your conversion value per cost metric by 100 to obtain your target ROAS percentage. Ensure the evaluation timeframe aligns with your in-app action’s conversion window for an accurate assessment of campaign performance.

Bid Limits

It is not recommended to set bid limits for Target ROAS, as it restricts Google Ads from utilizing AI to optimize your bids. Bid limits can hinder Google Ads‘ ability to adjust bids to meet your target ROAS effectively. Bid limits are available for Search and Shopping portfolio bid strategies. If you choose to set bid limits, they will only apply to Search Network auctions and are exclusively available for portfolio bid strategies.

Max. bid limit

  • The highest CPC bid that you allow Google Ads to set when utilizing Target ROAS.

Min. bid limit

  • The minimum max. CPC bid that you want Google Ads to set when using Target ROAS. Please note that Google Ads may occasionally set a max. CPC bid below your specified minimum bid limit due to smart pricing. Consequently, the bid limit you set here may not be the absolute lowest bid that could be set.

Ad Group Targets

Ad Group Targets can be applied to both Standard and Portfolio bidding strategies. In a portfolio strategy, optimization is done collectively for a single target across campaigns, ad groups, and keywords. While it is possible to set individual targets for each ad group, this is not recommended as it can limit the effectiveness of Smart Bidding.

Note: Ad Group Targets are not applicable for Target ROAS in App campaigns for installs, Shopping, or Discovery campaigns.

Average Target ROAS

Your Average Target ROAS represents the traffic-weighted average ROAS that your bid strategy has optimized for. It takes into account the changes you’ve made to your target ROAS over a specific time period. As a result, your Average Target ROAS may differ from the initial target ROAS you set.

This metric allows you to measure the ROAS that your bid strategy aimed for during specific time periods. By adjusting the date range, you can assess the optimization of your strategy over that period. Keep in mind that you won’t have an Average Target ROAS for time periods with no traffic.

To view the Average Target ROAS metric and evaluate actual performance against target performance, follow these steps:

  • Access the performance table on your „Campaigns“ page.
  • Add a new column and select „Avg. Target ROAS“ from the „Performance“ category.
  • Alternatively, you can add it to the performance chart.

Location of Metrics

The Average Target ROAS metric allows you to measure the ROAS that your bid strategy has targeted for specific time periods. By adjusting the date range, you can determine the optimization focus during that period. Remember, you won’t have an Average Target ROAS for time periods with no traffic.

To view the Average Target ROAS metric, follow these steps:

  • Add a column to the performance table.
  • At the top of your „Campaigns“ table, click on the column icon (depicted as the Google Ads columns icon).
  • Choose „Avg. target ROAS,“ „Avg. target cost per install,“ or „Avg. target cost per in-app action“ from the „Performance“ category.
  • You can also find the Average Target ROAS metric in your bid strategy report, alongside the „Actual ROAS“ which represents the achieved ROAS by the strategy. Refer to the bid strategy report documentation to learn how to access it.

The Average Target ROAS metric is available for both standard and portfolio bid strategies.

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