Smart Bidding in Google Ads

Imagine running Google Ads campaigns where bids adjust automatically to target the right users at the perfect moment. That’s the promise of Smart Bidding, an AI-powered feature in Google Ads that optimises bids in real-time to improve campaign performance.

For many PPC marketers—especially beginners—Smart Bidding can feel both exciting and overwhelming. With constant algorithm updates, new automation features, and ever-changing best practices, mastering Smart Bidding requires strategy and careful execution.

This in-depth guide will cover everything you need to know about Smart Bidding, including how it works, when to use it, common pitfalls, and best practices for optimising your campaigns.

What Is Smart Bidding?

Google defines Smart Bidding as:

“Smart Bidding refers to bid strategies that use Google AI to optimise for conversions or conversion value in each and every auction.”

Unlike manual bidding or rules-based automation, Smart Bidding analyses multiple data signals—such as device type, time of day, location, and user intent—to determine the optimal bid for each auction.

Key Smart Bidding Strategies

Google Ads offers four main Smart Bidding strategies, each designed for different goals:

1. Target Cost Per Acquisition (CPA): Aims to get as many conversions as possible at your target CPA.
2. Target Return on Ad Spend (ROAS): Focuses on maximising conversion value at a desired return.
3. Maximise Conversions: Works to get the highest number of conversions within a set budget.
4. Maximise Conversion Value: Optimises for the highest total conversion value, making it ideal for businesses with varied transaction amounts.

When Should You Use Smart Bidding?

Smart Bidding isn’t a one-size-fits-all solution. Selecting the right strategy depends on your campaign goals, available data, and audience. Below are examples of when to use each strategy:

Target CPA

• Best for lead generation campaigns where controlling cost per lead is crucial.
• Example: A SaaS company running a free trial signup campaign wants to maintain a $50 CPA. Smart Bidding will adjust bids to focus on users likely to convert within this range.

Target ROAS

• Ideal for profit-driven campaigns, typically in ecommerce.
• Example: An online retailer selling high-end electronics aims for a 400% ROAS (i.e., $4 return for every $1 spent). Smart Bidding will prioritise auctions that attract high-value buyers.

Maximise Conversions

• Best when brand awareness or market expansion is the goal, regardless of cost per conversion.
• Example: A non-profit wants to maximise email signups for an awareness campaign. This strategy will help achieve the highest volume of conversions within budget.

Maximise Conversion Value

• Works well for campaigns with varied transaction values where revenue maximisation is key.
• Example: A luxury travel agency offering packages from $5,000 to $20,000 uses this strategy to prioritise high-value bookings.

Common Pitfalls of Smart Bidding

Despite its advantages, Smart Bidding is not foolproof. Marketers must understand potential pitfalls to avoid costly mistakes.

1. Insufficient or Incorrect Data

Smart Bidding relies on historical data. If a campaign lacks conversion volume or has incorrect tracking, the algorithm may underperform.

• Example: A campaign with only 10 conversions per month may not be ideal for Target ROAS or Target CPA strategies yet.
• Solution: Use Maximise Clicks initially to drive traffic and gather sufficient conversion data before switching to Smart Bidding.

2. Misaligned Goals

Choosing the wrong bidding strategy can harm campaign performance.

• Example: A retailer mistakenly applies Target CPA ($20) to a holiday sale, even though their products have a $200 average order value. While this may increase conversions, it sacrifices profitability.
• Solution: Clearly define campaign goals and ensure the chosen Smart Bidding strategy aligns with them.

3. Ignoring the Learning Phase

Smart Bidding requires a learning phase to stabilise performance. Frequent adjustments can disrupt this process.

• Example: A campaign using Target CPA for one week sees fluctuating results and switches to Maximise Conversions prematurely, preventing the algorithm from optimising.
• Solution: Allow at least 1-2 weeks for Smart Bidding strategies to complete the learning phase before making changes.

4. Overlooking External Factors

Google’s AI does not automatically account for seasonal trends or external market shifts.

• Solution: Use Google’s Seasonality Adjustments tool to help the algorithm anticipate temporary shifts during sales, promotions, or national events.

5. Underutilising Advanced Features

Many advertisers set up Smart Bidding but fail to leverage tools like bid simulators, audience layering, and custom conversion values.

• Solution: Test these advanced settings to refine your bidding strategy and improve results.

Best Practices for Smart Bidding Success

To fully capitalise on Smart Bidding, it’s essential to pair automation with strategic oversight. Follow these best practices to maximise performance.

1. Feed the Algorithm with Clean, Accurate Data

Smart Bidding depends on high-quality data. Inaccurate conversion tracking can lead to poor performance.

Solution: Regularly audit your conversion tracking setup to ensure all key actions (purchases, form submissions, calls) are properly tracked and attributed.

For ecommerce campaigns, make sure transaction values are included for accurate ROAS calculations.

2. Set Realistic Goals

Unrealistic CPA or ROAS targets can limit impressions and bidding effectiveness.

Example: If your average CPA is $50, don’t set Target CPA to $20 immediately. Instead, adjust gradually towards your ideal target.

Ensure that your daily budget aligns with your CPA goal. A $50 daily budget with a $50 CPA target will severely limit ad serving.

3. Layer Audiences and Signals

Enhance Smart Bidding by providing audience context.

Solution: Use remarketing lists, in-market audiences, and customer match data to improve targeting. Start with Observation Mode, analyse performance, and adjust bids accordingly.

4. Leverage Seasonality Adjustments

Inform the algorithm about expected fluctuations in demand.

Solution: Before a major sale or holiday, input seasonality adjustments and increase daily budgets to accommodate increased demand.

5. Monitor Performance with the Right Metrics

Beyond Google’s automated recommendations, manually review Auction Insights, Search Impression Share, and Audience Performance for optimisation opportunities.

6. Run Experiments to Validate Strategies

Smart Bidding strategies should be tested before full-scale implementation.

Solution: Use Google Ads Experiments to split-test Target CPA vs. Maximise Conversions or Target ROAS vs. Manual Bidding before committing to a single approach.

Conclusion

Smart Bidding in Google Ads is a powerful tool that can streamline campaign management, optimise performance, and save time—but it requires strategic oversight.

By feeding the algorithm with clean data, setting realistic goals, leveraging audience insights, and continuously testing strategies, advertisers can unlock the full potential of Smart Bidding.

Mastering Smart Bidding isn’t about setting it and forgetting it—it’s about intelligently guiding automation to maximise results. Implement these best practices, avoid common pitfalls, and take your PPC campaigns to the next level.