Should You Target CPA in Google Ads? -- A Bidding Strategy Overview
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Google Ads bidding strategies can be a bit of a mystery sometimes, but knowing which one suits your business, goals, and market is absolutely critical when it comes to the success of your ad campaigns. The good news is that you can find answers to pretty much any question you might have -- including whether or not you should target CPA in Google Ads.
How to answer this question?
Read on and find out more!
What Is the Target CPA Bidding Strategy in Google Ads?
To know what is the “target CPA” strategy, you must first understand CPA -- which fortunately is a pretty easy part of this learning process because CPA stands for, simply, Cost per Acquisition. In other words, CPA is the monetary value associated with acquiring one customer (in this case, via Google Ads).
The formula you can use to calculate CPA is the following:
Divide the total cost of conversions by the total number of conversions.
So what does it mean to “target CPA” as a bidding strategy in Google Ads?
Well, it pretty much means what it says: that you should aim for a low Cost per Acquisition. In Google Ads, you can choose this option and pay each time an engagement leads to a conversion (which you can define when you set up your campaign and it can be a sign up, a download, etc.).
How does this Google Ads sorcery work?
Well, according to Google themselves,
“Using historical information about your campaign and evaluating the contextual signals present at auction-time, Target CPA bidding automatically finds an optimal bid for your ad each time it's eligible to appear. Google Ads sets these bids to achieve an average CPA equal to your target across all campaigns using this strategy.”
So in normal human language translation, this means that Google uses the data already on your campaign to find the best possible bids every single time your ad is eligible to pop in someone’s Search Engine Results Page or display network
Sounds pretty neat, especially when you don’t want to pay for clicks, right?
Hold your horses, cowboy, though, targeting CPA is not that simple. It’s not rocket science either, but there are some things you might want to consider before you jump into this.
Pros of the Target CPA in Google Ads
Obviously, there are quite a few benefits to choosing the “target CPA” bidding strategy in Google Ads.
One of them is related to the fact that it helps you streamline the bidding process when you have more than two ad campaigns running.
Furthermore, this bidding strategy can also help you save money by not bidding on keywords that are absolutely useless for you (read: keywords that are not targeting who you actually want to target, and thus, stand a low-to-zero chance of converting internet users into your customers).
Cons of the Target CPA in Google Ads
Nothing in life is perfect and the “target CPA” bidding strategy in Google Ads makes no exception from this universal rule.
What are the cons of going after the CPA when you set your Google Ads bidding strategy?
Well, to begin with, the entire plan will fail if you have unrealistic expectations for your industry, or if you don’t have enough data about your conversions in your Google Ads account.
Moreover, it is also worth keeping in mind that the target CPA strategy might sometimes work for bids with a higher budget delivery and conversion rate (so conversion volume will be limited too).
One of the key points here is that CPA is per-conversion metric, but if the conversion is a sign up to a freemium product and you get a lot of “conversions” but no one actually taking any definitive action once signed up, the intent of the “target audience” isn’t to convert.
Putting context is the key to choosing whether or not to go with CPA as a bidding strategy.
Last, but not least, the “target CPA” bidding strategy also puts your money (and data) in the hands of Google. If you’re OK with letting a machine handle your cash (and your business’ success), sure, this is an automated solution that might work out pretty well for you.
When Is Targetting CPA Most Profitable?
As a general rule, both B2B and B2C businesses can profit from targeting CPA as a bid strategy in Google Ads.
However, B2C companies (and particularly those running ads on Google Shopping) might find targeting CPA more profitable because they can monetize conversions. As such, it makes sense to plan their ads according to how much it costs them to get a conversion (a purchase, in their case).
Furthermore, in Shopping Ads, the average CPA also tends to be lower (just under $39, as compared to all Google Ad clicks, which average at around $45).
It’s not a universally valid rule (like the one where nothing is ever 100% perfect we mentioned above). But it’s something you can guide yourself on (along with industry benchmarks, which are always a good point to check out).
Ready? Set! Target CPA!
OK, let’s say you have decided that this is a really good option for you and that you want to set up your target CPA bid strategy in Google Ads.
First, as Google points out as well, make sure you are comfortable using twice your daily budget (without exceeding a monthly limit).
Furthermore, make sure you have conversion tracking turned on in your Google Ads (since the target CPA bid strategy will need this information to automatically pick the best bids for you).
Oh, and don’t forget to make sure you check in on your invalid traffic every once in a while. You might be surprised at what data has to tell you once you start looking at it in detail).