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Target ROAS in Google Ads (AdWords) Explained
In this video we are going to analyse the target ROAS bid strategy in Google Ads. It’s a strategy that definitely falls into the category of data driven and performance as opposed to the more vanity bidding strategies like target impression share.
We’re going to look at what the strategy is, how it works and when to use it for your PPC campaigns.
The target return on advertising spend is a bid strategy where Google optimizes your keyword bids towards attaining a target return on advertising spend. Your bids are set at auction time so Google is looking at real time data to decide on how your bids should be set.
Of course, for this to work you’ll need to ensure that you assign a value to your conversions. Unlike target CPA where you set the maximum amount you’re willing to pay per conversion, you’re setting what kind of return you want from your ad spend as a percentage. It’s a simple formula
Let’s take a look at an example
Say you want to achieve $5 in sales for every $1 you spend on Google ads, that = a 500% return on ad spend – so you would set your target ROAS as 500% to achieve this goal
So if that campaign spends $8,000 per month Google will optimize bids with the objective to deliver $40,000 worth conversion value
Shortcomings
Again like target CPA you can’t just set the an unrealistic target.
For example, if you want an 800% return on ad spend, when your campaigns can barely achieve that in the first instance. Set a realistic target ROAS otherwise your campaign will simply stall and fail because Google won’t be confident it can attain the target ROAS. Therefore auction time bids will be set too low and you’ll end up not being able to spend budget.
Because it’re optimizing towards a target ROAS, it’ not going to care which product is being sold as long as it achieves the target ROAS. Therefore if your business requires specific sales for different products and can’t allow a particular line not to sell, You might need to step in or analyse the structure of your campaigns and segment them.
And as I said before, with any bid strategy based on conversions or sales, you need enough data, the more conversions you get in a 30 day period, the better the data and the better Google optimizes
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