Google Adds Pay-Per-Conversions Making Ads More Budget-Friendly
By Dan Baum
Anyone running Google Ads knows that one of the most important metrics involved in your budget is cost per click, but what about your cost per acquisition or CPA?
This measure how much ad-spend it takes to get one conversion on a given campaign, ad group, or keyword, and Google just changed how we view this very important metric.
Last Thursday, Google announced the availability of conversion-based bidding for display campaigns called “Pay Per Conversion.”
What this means is that instead of paying when a user sees or clicks on an ad, a company would only pay upon conversion on the following page.
In other words, you basically only pay when a user completes a desired action clicking an ad.
Here is the official announcement from Google.
So What Does This Mean for Your PPC Campaigns and Google Ad Accounts?
Marketers need to sit up and pay attention because this flips paid advertising on Google on its head.
With the new bidding options, advertisers are no longer paying for actions that don't always result in value for the company.
With PPC, regardless if a user bounces or not when they click an ad, the advertisers pay and we’ve been forced to have an “it is what it is” mentality.
However, now, advertisers won't feel like they're just throwing their money away.
This shift will force advertisers to focus on optimizing their user experience when someone clicks an ad.
This will not only make users happy, but give Google another source of ad revenue. It will also reward advertisers for providing the right users the right information.
How Do I Get Started?
The update went live last week, so you should see which of your ads are eligible to run CPA bidding.
In order to be eligible your account must have more than 100 conversions in the past 30 days. The time between initial click and conversion also has to be less than 7 days for greater than 90% of those conversions.
To see your account’s historical data on these measurements, you can segment data in Google Ads from the past 30 days or longer by Conversions > Days to Conversion.
Once you know if you are eligible or not, the bidding operates similarly to how search campaigns work now with advertisers setting a “Target CPA” under the bidding options of the display campaigns.
Google described how the new bidding options work:
“Let’s say your target CPA is $10, and you drove 30 conversions over the weekend. You’ll pay exactly $300, with an actual CPA of $10.”
It works in the same way that bidding on a cost per click does; You will never pay MORE than your set target cost per acquisition.
The goal here is to generate as many conversions possible at that target number.
And don’t be discouraged if you are ineligible right now!
Google says that eligibility is refreshed daily, so once your conversions increase you are free to participate.
Who Would This Work For?
Using a target CPA would work best for high volume campaigns, where the product or service sold is clear.
For example, if a conversion in your ads account means a purchase, use your average cart size to calculate a target CPA that gives you a big enough margin to remain profitable. The max bid on a CPA is around $200 right now.
There are some restrictions, too.
For example, advertisers cannot use pay for conversion and bid toward offline conversion types. These include import from clicks and store visits. Pay for conversions also does not work for conversions imported from calls or Salesforce or for cross-device conversions.
A More Level Playing Field
The entire idea is brand new, so we will keep an eye on how companies are using pay per conversion in the future, but we’re excited to see more options when it comes to paid advertising on Google.
In the long run, it seems that larger companies with more conversions will shift a lot of their budget towards CPA instead of PPC.
This will desaturate a lot of industries, allowing smaller companies with smaller ad budgets to get their ads in front of more potential customers, all for a lower cost per click. This is a huge move for accessibility and creating a more level online playing field.
Wondering where to begin?