Return on Investment, better known as ROI, is a central economic metric often used to measure the likelihood of a probable return from an investment. In the context of Google Ads, ROI refers to the financial return you receive from your advertising campaigns.

To calculate ROI in Google Ads, the formula used is:

ROI = (Earnings from ads - Costs of ads) / Costs of ads

For instance, if you spent 1000 kr. on a Google Ads campaign, and it resulted in sales of 5000 kr., your ROI would be:

ROI = (5000 kr. - 1000 kr.) / 1000 kr. = 4, or 400%

This means that for every krone you spent on your Google Ads, you earned 4 kroner back.

By tracking your ROI, you can evaluate the effectiveness of your Google Ads campaigns, compare the effectiveness of different campaigns or bidding strategies, and make informed decisions about where to invest your marketing funds for the best possible return.

Manual CPC, or Cost-Per-Click, is a bidding strategy that gives advertisers and Google Ads agencies like us, full control over the value of our bids on Google Ads. Unlike automatic bidding strategies, where Google's algorithms automatically adjust bids based on campaign objectives, with manual CPC we decide for ourselves how much we are willing to pay for a click on our ads.

With Manual CPC, you set your bids at the ad group or keyword level. For example, if you sell bicycles, you might decide to bid more on the keyword "mountain bikes" than "children's bicycles", based on their potential to drive sales and their significance to your business.

One of the significant advantages of manual CPC is control. You can fine-tune your bids based on your understanding of your business, your products, and your marketplace. You can also adjust your bids quickly and effectively in response to market trends and seasonal changes.

However, this control comes with responsibility. Manual CPC requires constant monitoring and adjusting of your bids to ensure they remain effective. It can be time-consuming and demands a deep understanding of the Google Ads platform and your market to do it efficiently. It's also the reason why companies use Google Ads agencies like ours, as it's more cost-effective compared to having an in-house Google Ads specialist.

Manual CPC can be particularly useful for businesses with tight budgets that need to control where and how their money is spent or for advertisers with the time and experience needed to effectively manage and optimize their bids manually.

2. Automated bidding, also known as Smart Bidding, is a suite of bidding strategies in Google Ads that uses advanced machine learning to optimize your bids for each auction. With automated bidding, you don't need to manually set your bids for your ads, campaigns, or keywords. Instead, Google automatically adjusts your bids in real-time to achieve your specific campaign goals.

There are different types of automated bidding strategies, including Target-CPA (cost per acquisition), Target-ROAS (return on ad spend), Maximize Conversions, and Maximize Clicks. The choice of the right strategy depends on your specific goals. For example, if your primary goal is to increase conversions within your budget, you might choose the Maximize Conversions strategy.

One of the major benefits of automated bidding is efficiency. Instead of spending time manually adjusting your bids, you can devote this time to other aspects of your marketing strategy. Moreover, Google's machine learning algorithms can use a range of signals that you might not have access to or insight into when deciding how and when to bid.

However, there are some drawbacks to automated bidding. Firstly, it provides you with less control over your bids compared to manual bidding. Secondly, it might take a while for the algorithms to learn and optimize your bids, especially if you lack substantial conversion data. Thirdly, some automated bidding strategies, like Target-ROAS and Target-CPA, might increase your average CPCs as they tend to bid higher to get the most valuable clicks.

Automated bidding is particularly useful for advertisers who don't have the time or resources to monitor and adjust their bids continually or for those with clear conversion goals and enough conversion data to train Google's machine learning algorithms.

Target-ROAS, or Target for Return On Ad Spend, is an automated bidding strategy in Google Ads that aims to help you achieve the desired return on your advertising expenditure. This strategy is ideal for businesses that track the value of conversions, such as online sales, and want to optimize this value relative to their ad spend.

When using Target-ROAS, you set a target for how much value (in terms of conversion value) you want to receive for each dollar spent on ads. Google's algorithms then adjust your bids in real-time to achieve this target. For instance, if your Target-ROAS is 400%, Google's bidding algorithm aims to generate $4 in conversion value for every dollar spent on ads. It's crucial to ensure that your conversion tracking is set up correctly for this to work effectively.

One of the benefits of Target-ROAS is that it lets you focus on generating revenue rather than merely getting clicks or conversions. This can be valuable for businesses where different conversions have distinct values, as it allows you to prioritize the most valuable conversions.

A drawback of Target-ROAS is that it requires a significant amount of conversion data to be effective. Google recommends having at least 15 conversions in the past 30 days to use this strategy. Additionally, as with all automated bidding strategies, Target-ROAS gives you less control over your bids than manual bidding.

Target-ROAS can be a powerful tool for businesses looking to maximize the return on their advertising expenditure and who have the necessary data and resources to support it.

Maximize Clicks is an automated bidding strategy in Google Ads designed to generate as many clicks as possible within your budget. This strategy is ideal for businesses that prioritize website traffic over other goals such as conversions or revenue.

With Maximize Clicks, Google automatically sets your bids to help you achieve the highest number of clicks. This strategy is especially effective when you want to boost website traffic or enhance your online visibility. You can also set a maximum CPC bid cap to ensure Google doesn't exceed a particular amount per click.

The advantage of Maximize Clicks is that it's an easy and time-saving way to drive traffic to your site. You don't have to worry about adjusting your bids manually as Google will do it for you based on your campaign goals.

However, a downside to this strategy is that it doesn't consider the quality of the clicks or subsequent user behavior, like conversions. So, while you might receive more traffic to your site, there's no guarantee that this traffic will translate into sales or leads.

Maximizing clicks can be a good bidding strategy for businesses wanting to enhance their online visibility or for those running campaigns where traffic is the primary objective. It can also be useful for new businesses looking to boost their brand awareness.

Target CPA (Cost Per Acquisition) is an automated bidding strategy in Google Ads focusing on conversions. This strategy is ideal for businesses wanting to amass as many conversions as possible while keeping their cost per acquisition at a predetermined level.

When using Target CPA, you set the amount you're willing to pay for each conversion, and Google's algorithms then adjust your bids trying to achieve this. For instance, if you set your Target CPA to 100 DKR, Google's bidding strategy will attempt to get you as many conversions as possible for approximately 100 DKR each.

The advantage of Target CPA is that it helps ensure your Google Ads campaigns are profitable. By setting a limit on what you're willing to pay for a conversion, you can ensure you don't exceed your budgetary goals.

A downside to Target CPA, like Target ROAS, is that it requires a significant amount of conversion data to be effective. Google recommends that you have at least 30 conversions in the past 30 days to use this strategy. Additionally, as it's an automated bidding strategy, you have less control over your individual bids.

Target CPA can be an effective tool for businesses with a clear conversion goal and willing to invest time and resources to optimize their campaigns to achieve this objective.

Choosing the right bidding strategy for your Google Ads campaigns might seem challenging, but it doesn't have to be. In fact, it can be boiled down to a few simple steps:

Understand your business goals

Firstly, you need a clear understanding of what you aim to achieve with your Google Ads campaigns. Are you looking to boost website traffic? Are you focused on conversions? Or is it revenue that you're most interested in? Your answers to these questions will help you choose the right bidding strategy.

Consider your resources

If you have a small team or limited time, an automated bidding strategy might be the best solution since it will manage most of the bidding process for you. If you have more time and resources, a manual bidding strategy might offer more control and possibly better results, provided you're willing to invest the time to manage and adjust your bids.

Assess your available data

Some bidding strategies, like Target CPA and Target ROAS, depend on you having a significant amount of conversion data available. If you don't have this data, it might be better to select a different strategy until you've gathered enough data.

Test and adjust

Even after choosing a bidding strategy, it's essential to monitor your results and adjust your strategy as needed. If you're not getting the results you hoped for, don't be afraid to change your approach or experiment with a new one.

Google Ads is a powerful tool for businesses aiming to increase their online visibility, drive traffic to their website, and generate conversions. But success in Google Ads isn't just about crafting compelling ads – it's also about selecting the right bidding strategy.

Whether you choose manual CPC bidding for its flexibility and control, Target CPA to optimize your conversions, Target ROAS to maximize your return on ad spend, or Maximize Clicks to boost your traffic, it's essential to pick a bidding strategy that best supports your business objectives.

Remember, no one bidding strategy is right for everyone. Try different approaches, monitor the outcomes, and adjust as necessary. With the right strategy and a willingness to experiment and learn, you can leverage Google Ads to drive growth and success for your business.