A newsletter signup isn’t worth the same as a $1,000 sale — so why should your bidding strategy for Google ads treat them the same? That’s where Value-Based Bidding comes in.
Instead of just chasing clicks or basic conversions, value-based bidding helps you focus your ad spend on what really matters: driving conversions that bring the highest return for your business.
In this post, we’ll break down what value-based bidding is, how it works in Google Ads, and why it can transform the way you spend your ad budget to maximize return on investment (ROI).
What Is Value-Based Bidding?
Value-Based Bidding is a smart bidding strategy where bids are optimized not just for conversions but for the value of those conversions. Unlike traditional bidding methods that treat every conversion equally, VBB prioritizes conversions based on their business impact.
For example, an online store may value a $500 purchase more than a $20 purchase and want its bidding strategy to reflect that difference. Google Ads uses machine learning to automatically adjust your bids in real-time, focusing spend on clicks that are likely to lead to higher-value conversions.
Why Use Value-Based Bidding?
Here’s why you need to use value based bidding for your Google ads management:
- Focus on ROI, Not Just Volume: Instead of chasing just any conversion, VBB targets conversions that generate the most revenue or profit.
- Tailored to Your Business Goals: Whether it’s average order value (AOV), customer lifetime value (LTV), or lead quality, VBB lets you assign different values to different conversion types.
- Efficient Budget Allocation: The strategy intelligently distributes your budget where it will yield the highest value, avoiding wasted spend on low-impact clicks.
- Leverages Machine Learning: Google’s algorithms analyze millions of signals — like device type, location, time of day, and user behavior — to optimize bids for maximum value.
How Does Value-Based Bidding Work?
To get started with value-based bidding in Google Ads, you need to:
- Set Up Conversion Tracking: Track actions that matter (sales, sign-ups, calls).
- Assign Values to Conversions: Assign dollar values to each type of conversion. For example, a newsletter signup might be worth $5, while a completed purchase could be $100.
- Use Supported Smart Bidding Strategies:
- Target ROAS (Return on Ad Spend): Google adjusts bids to maximize conversion value while aiming to hit your target ROAS percentage.
- Maximize Conversion Value: Google automatically sets bids to get the highest conversion value possible within your budget.
- Feed Accurate Data: Make sure your conversion values are accurate and consistent for machine learning to be effective.
Google then uses its advanced algorithms to automatically raise or lower bids based on real-time signals like device, location, and user behavior to maximize your campaign’s total conversion value.
Best Practices for Implementing Value-Based Bidding
Implementing value-based bidding effectively requires more than just assigning conversion values and turning on a smart bidding strategy. Here are some important best practices to follow:
- Define Clear Conversion Values: Use historical sales data and customer insights to set realistic values.
- Start with a Conservative ROAS Target: Give Google’s algorithm time to learn and optimize bids effectively.
- Ensure Accurate Conversion Tracking: Inaccurate data can mislead bidding algorithms and hurt performance.
- Monitor and Adjust Regularly: Track campaign performance and adjust targets as business goals evolve.
Common Pitfalls to Avoid
While value-based bidding can be a powerful tool, there are common pitfalls that can undermine your Google ad success if you’re not careful. Being aware of these challenges can help you avoid costly mistakes and keep your campaigns running smoothly.
- Don’t assign arbitrary or inaccurate conversion values.
- Avoid launching value-based bidding without sufficient historical data.
- Don’t rely solely on automation. Continue manual oversight and strategic adjustments.
- Ensure your business goals are clearly reflected in your conversion values.
- Avoid setting unrealistic ROAS targets that limit the algorithm’s flexibility.
- Don’t neglect ongoing data quality checks (stale or incorrect data can misguide bidding decisions).
Measuring Success with Value-Based Bidding
Track KPIs such as:
- ROAS: Are you earning more revenue for every dollar spent?
- Conversion Value: Is total revenue increasing?
- CPA: Is the cost per acquisition aligning with your profit goals?
- Revenue per Click: Are your clicks becoming more valuable over time?
Use Google Ads’ reports and Google Analytics to dive deeper into performance trends.
Conclusion
Value-Based Bidding transforms Google Ads campaigns from a volume-driven approach into a strategic, ROI-focused machine. By bidding based on the real value of conversions, your campaigns become smarter, your budget works harder, and your business grows more profitably.
Ready to unlock the power of value-based bidding? At Elivated, we specialize in setting up and optimizing smart bidding strategies tailored to your unique business goals. Contact us today to start maximizing your Google Ads ROI.