Is Google Price-Fixing?

Introduction

In the realm of digital advertising, smart bidding has become a sophisticated yet controversial tool. When you first drop your Target ROAS (Return on Ad Spend), you notice an uptick in traffic and conversions. However, as you attempt to scale, you max out on the traffic Google allocates to you. The dilemma then is you end up paying more for the same audience.

The core of this issue lies in the way smart bidding operates. Smart bidding uses conversion signals to predict the likelihood of conversions and determines the value based on your set goals and targets. This method fixes the price according to how valuable Google perceives your traffic, which led to interesting revelations during a Traffic World presentation I attended.

The Auction Dynamics

CPC Fluctuations: On a low CPC (Cost Per Click) day with a Target ROAS (TROAS) in place, you might get 30 clicks. However, on a high CPC day with lower performance, you still get significant traffic. This is due to the auction environment.

Incremental Bidding Issues: Smarter bidding doesn’t scale efficiently because it doesn't optimize for incremental impression delivery. The idea is that only a fixed number of users are available for conversions. The highest bidder captures these conversions, but increasing your bid beyond a point yields diminishing returns.

Community Insights: Redditors in the PPC subreddit unearthed patterns where competitors with a lower target would capture more traffic, indicating an inefficient and perhaps manipulated auction environment.

Understanding Smart Bidding

Smart bidding bases its strategy on conversion signals to predict both the likelihood and value of conversions. It adjusts bids based on your goals and targets. The highest Target CPA (Cost Per Acquisition) or TROAS wins the majority of the finite high-value traffic. This leads to non-scalability, as you pay more only to access limited extra traffic.

Manual Bidding and Its Benefits

Switching to manual bidding can reclaim this lost audience. The arbitrary capping that comes with smart bidding disappears. With manual bids, you can control your CPC and scale more effectively by targeting the broader audience that smart bidding ignores.

Price Fixing Concerns

There’s a notion among PPC specialists that smart bidding constitutes a form of price-fixing. Google's automated bids, based on set goals and targets, restrict fair competition. When two advertisers with different TROAS compete, Google favors the one willing to accept less profit, thereby manipulating auction outcomes.

Strategies for Improved Performance

1. Manual CPC and ROAS:

   • Enabling manual CPC can often reduce the cost per click, bringing in more traffic and ensuring a steady flow of impressions and conversions.

2. Exploring Past Methods:

   • Implementing old strategies like RLSA (Remarketing Lists for Search Ads) aids in acquiring new customers and targeting cold traffic efficiently.

3. Long-term Campaigns:

   • Running campaigns for extended periods (90 days) rather than quick bursts to accommodate for slow yet steady cold traffic conversion.

Conclusion

Google's smart bidding optimizes for your goals by pricing the ads based on predicted conversion value, creating a "pay to play" scenario. Transitioning to manual bidding allows for greater control, targeting broader audiences, and potentially reducing costs in a seemingly fixed auction system.

Introduction

• Smart bidding
• Manual bidding
• Conversion signals
• Target ROAS (TROAS)
• Cost Per Click (CPC)
• Cost Per Acquisition (CPA)
• Impression delivery
• Price fixing
• PPC (Pay Per Click)
• Conversion optimization

Introduction

Q1: What is smart bidding in Google Ads? A1: Smart bidding is an automated bidding strategy that uses machine learning to optimize for conversions or conversion value in each and every auction.

Q2: Why doesn’t smart bidding scale effectively? A2: Smart bidding has a finite pool of high-potential users it targets. Beyond a certain threshold, increasing bids only results in higher costs without proportionate gains in traffic or conversions.

Q3: How does manual bidding differ from smart bidding? A3: Manual bidding gives you control over your Cost Per Click (CPC), allowing for potential lower costs and broader audience targeting, whereas smart bidding automates this based on set goals and targets.

Q4: Is Google engaging in price-fixing with smart bidding? A4: Many argue that smart bidding amounts to price-fixing since Google determines bids based on advertiser's goals and targets, favoring those willing to incur higher costs or lower profits.

Q5: What are some strategies to improve campaign performance? A5: Utilizing manual CPC, leveraging RLSA (Remarketing Lists for Search Ads), and running long-term campaigns to nurture cold traffic can enhance performance and scalability.