Understanding CPM, CPA and CPC Bidding

Bidding Strategy using CPM, CPA and CPC

There are mainly two types of Bidding with Google AdWords, but these can also be applied to general search engine marketing. Two focuses are the impressions and conversion. Impression is simply focusing on the number of views increasing – Increase the exposure of your ads to the most people. Generally, CPM (Cost-per-thousand-impression) is associated with brand awareness objective, while CPC and CPA (Cost-per-click or Cost per acquisition) are focused on increasing conversion (which is a particular action that advertisers want to see on their websites – whether it be sales, sign-up for e-newsletter, participate in a contest, or like Facebook page.)

Please note that we are expecting you already are aware of basic of Google AdWords account setup and have previously placed ads on Google AdWords. If you aren’t familiar with search engine marketing, please read this blog post first: Search Engine Ranking and Google AdWords Ranking

CPM Bidding
Within Google AdWords, you can place only do CPM bidding for the following campaign types:

1. Display Network Only – All Features
2. Display Network – Remarketing

CPA Bidding
For CPA bidding, you must turn on the “conversion tracking” – a free toll that shows you what happens when people click your ad and checks whether these people buy your product or signed up for newsletter. Using this information, you can calculate the ROI of your google adword campaign.

Two types of CPA bid can be setup: (1) Target CPA, and (2) Maximum CPA. For downloading apps, you can only do the Target CPA.

Target CPA: This is the average amount you’d like to pay for a conversion. Some bids will be above this target and some will be below it, but altogether, the cost per conversion should average to the Target CPA you set.

Maximum CPA: This is the most you’re willing to pay for each conversion. When you use conversion optimizer, most of your bids will be below your maximum.
CPC Bidding
Two types of CPC bidding can be configured:
1. Automatic CPC Bidding
A bid strategy that automatically sets and adjusts your maximum bids (the most you’ll pay for each click on your ad). Another option, manual bidding, lets you choose your own bid amounts.

Automatic bidding is not available for:
A. Display Network only – Mobile Apps
B. Bid Adjustments based on day and time

2. Manual CPC Bidding
A bid strategy in which you can manually put the daily limit for each of your ad. It gives you full control to set the bid amount yourself. It may limit the number of impression or make your ads have lower ad position (meaning your ads will be below other competitors’ ads and may not get more clicks or exposures).

This chart show few of the flexible bidding strategy you can apply for your Google AdWords account.

  Flexible bid strategy When to use it Where to apply it
1 Maximize clicks automatically sets bids to help you get the most clicks within a target spend amount that you choose.Flexible version of automatic bidding When site visits are your primary goalWhen you want to maximize traffic on long tail terms while keeping within a certain spend Campaigns, ad groups, keywords
2 Target search page location automatically adjusts bids to help you get your ads to the top of the page or the first page of search results.New bid strategy When you want more visibility on the first page of Google search results or in the top positions Campaigns, ad groups, keywords
3 Target outranking share automatically sets bids to help you outrank another domain’s ads in search results.New bid strategy When you want more visibility than other domains in search results Campaigns, ad groups, keywords
4 Target cost-per-acquisition (CPA) automatically sets bids to help you get as many conversions as possible while reaching your average cost-per-acquisition goal.Flexible version of Conversion Optimizer When you want to get the most conversions with your target CPA Campaigns, ad groups
5 Enhanced cost-per-click (eCPC) automatically adjusts your manual bid up or down based on each click’s likelihood to result in a conversion.Flexible version of Enhanced CPC When conversions are the main objective, but you also want control over your keyword bids Campaigns, ad groups
6 Target return on ad spend (ROAS) automatically sets your bids to maximize your conversion value, while trying to reach an average return on ad spend.New bid strategy When you value conversions differently, and want to meet a target ROAS Campaigns, ad groups, keywords


Conversion Optimizer is often used in improving the CPC/CPA and conversion goal.
– If your organization is focused on improving conversions (whether it be sales, sign-ups, mobile apps downloads), the conversion optimizer can help automatically get the most possible conversions for your budget. By identifying the high value CPC and low value CPC, the conversion optimizer will automatically increase the bid for the high value CPC and lower the bid for the low value CPC.

Enhanced cost-per-click (eCPC) is a bidding feature that raises your bid for clicks that seem more likely to lead to a sale or conversion on your website. That helps you get more value from your ad budget.

Enhanced CPC (eCPC) helps get more conversions or sales. eCPC can work with the maximum bid you set, while conversion optimizer can’t. eCPC will utilize only 50% of the traffic while conversion optimizer will utilize 100% of the traffic. eCPC will raise your maximum CPC bid up to 30%.

eCPC will leave alone 50% of the traffic to automatically check whether the increased CPC bid will get better result or not. If the increased CPC bid gets more traffic, then will it will adjust accordingly.
eCPC for text ads available on:
1. Search Network
2. Display Network
3. But doesn’t work for Mobile app downloads
eCPC only works for Google Search in product listing ads.

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