Adwords introduced Conversion Optimizer awhile ago and it is already out of beta. The Conversion Optimizer is a built-in feature in Adwords that is served as an automatic bidding tool based on a set CPA.
The Conversion Optimizer (CPA bidding feature) is now out of beta and available to campaigns with at least 200 conversions in the last 30 days. The Conversion Optimizer manages your CPC bids, with the goal of keeping the cost of each conversion below the maximum cost-per-acquisition (CPA) you specify.
The Conversion Optimizer currently only works on campaigns that have at least 30 days of conversion data with at least 200 conversions. I believe the more conversion data (aka history) you have with your campaigns, the most accurate this feature can work.
The Conversion Optimizer manages your CPC bids for you, making adjustments based on the likelihood of a conversion in each ad auction.
Determining the Maximum CPC
Below is how the Max CPC is determined by the feature:
The Conversion Optimizer predicts a conversion rate for your ads every time they’re eligible to appear. This prediction is based on various factors. For example, here are some of the factors that affect the conversion rate on Kim’s custom shirt website:
- The search query – Kim’s conversion rate is higher when users search for custom shirts than when they search for shirts.
- The location of the user – Her conversion rate is highest when her ad shows in the United States.
- The conversion history of particular sites – When her ad shows on certain types of content sites in the Google Network, Kim is more likely to get conversions.
Determining the Maximum CPA
To activate the Conversion Optimizer, you will be recommended Maximum CPA values for each of the adgroups within your campaign. You are to either accept the recommended CPA values or set new CPA values. Adwords works out your adgroup CPA according to the method below, assuming your adgroup consists of 2 keywords:
- Max CPC: $1.00
- Conversion Rate: 10%
- Number of Conversions: 100
- Max CPC: $1.40
- Conversion Rate: 20%
- Number of Conversions: 50
To determine the Maximum CPA for a keyword, the Conversion Optimizer divides the Max CPC by the Conversion Rate:
- Max CPA = Max CPC / Conversion Rate
- Max CPA of Keyword #1: $10.00
- Max CPA of Keyword #2: $7.00
The Conversion Optimizer works out the recommended Maximum CPA for the campaign by using the Maximum CPA of each keyword. In the above example, Keyword #1 has twice as many conversions as Keyword #2, so the weighted average is $9.00. This is the recommended Maximum CPA for the campaign.
If you set your maximum CPA bid to the recommended amount, you should see more conversions without much change to your costs. If you set your bid below the recommended amount, you’re likely to pay less for each acquisition, but you may also get less traffic on your ad and fewer conversions.
Inside Adwords blog also recently published an article that summaries the Conversion Optimizer.