• Automated Bidding: Machine learning algorithms are used in automated bidding to change bids in real time based on a number of factors, such as how consumers behave and how much competition there is. This strategy is particularly useful for campaigns with historical data and a high number of conversions.

For example, a business might use automated bidding in a Google Ads campaign to optimize bids for different ad groups based on the historical levels of cost per conversion in each ad group.

• Manual Bidding: In manual bidding, you set bids for specific keywords or ad groups based on your own analysis. This strategy is often used for new campaigns or when a business wants more control over its bidding strategy.

For example, advertisers can manually set bids for the keywords in a campaign based on the maximum cost per click they assign to each keyword. For more competitive keywords they will need to set a higher bid.

• Cost Per Click (CPC) Bidding: When advertisers use CPC bidding, they pay for each click in their campaigns. This method is often used in search campaigns. For example, a business may bid $1 on the keyword "running shoes" and $2 on “white running shoes” if the traffic for white shoes is more valuable for them. This business may pay much less than their Max CPC bid depending on the level of competition.

Display, Video Campaigns and many social media advertising campaigns include CPC as part of the performance reports, but bidding is generally done using CPM bidding (explained next).

• Cost Per Impression (CPM) Bidding: When you use CPM bidding, you pay for every 1,000 times an ad is seen. This method is often used in display advertising when the goal is to make people aware of a brand or reach a large number of people.

For example, a business could bid on a banner ad spot on a popular website and pay a set amount every time the ad is shown 1,000 times.

• Cost Per Action (CPA) Bidding: With CPA bidding, advertisers use automated bidding based on the value of a specific consumer action (for example, making a purchase, submitting a form or making a reservation). It is important to note that advertising platforms still charge the advertiser based on clicks or impressions as they cannot guarantee that consumers will take these actions. This method is often used in advertising campaigns designed to generate conversions (as opposed to building awareness).

For example, a business can design a Performance Max campaign on Google to drive sales and use a CPA bidding strategy based on the value of each purchase. If the CPA target is too low, they may not be able to generate any sales. If the target is too high, then the transactions may not be profitable.

Return on Ad Spend (ROAS) Bidding: With ROAS bidding, advertisers can focus on the return on investment of the ad campaigns. It is an “apples to apples” comparison, since it compares the amount of money spent on ad campaigns with the conversion value (revenues). For example, a ROAS of 300% (or 3x) means that for each dollar spent on advertising, the campaigns are able to generate $3 in revenues. This is the goal standard in bidding methods. However, for it to work properly, accurate conversion tracking is essential (we will cover this topic later in this course).

Conclusion

To choose the best bidding strategy for your advertising campaigns, you need to know your advertising goals, budget, and target audience. By understanding the different types of bidding strategies and their pros and cons, you can choose the one that will give you the best return on investment and help you reach your advertising goals.