Updated on 3/24/2021
Return on Advertising Spend (ROAS) is one of the most common KPIs retailers use to measure success on Google Ads. Because of its critical importance, Google developed Target ROAS, an automated bidding tool that adjusts Cost-Per-Click (CPC) bids based on data at auction to optimize ROAS.
Target ROAS has gone through several changes since its creation in 2013, leaving questions about whether this solution is right for your business. Though helpful for some retailers, this tool may not be the best fit for your campaign because it is a set-it-and-forget-it solution rather than a means for strategy refinement and growth.
In this article we define Target ROAS and explore how it can impact your performance marketing strategy.
Google rolled out Target ROAS in late 2013, around the same time it unveiled other automated bidding tools like Target CPA and Maximize Clicks. In February 2021, Google quietly announced an update to Target ROAS in paid search, revealing that by April 2021, it would merge with the Maximize Conversion Value bidding strategy.
What It Does:
Target ROAS is a bidding tool that allows you to set a ROAS goal for campaigns, ad groups, and keywords or products. Google automatically sets maximum CPC bids to impact conversion value and achieve an average ROAS that equals the goal set. Google uses your historical sales to further refine bids.
In order to implement Target ROAS, you need to set conversion values for your products in your Google Ads account. Setting conversion values allows Google to more accurately measure return on investment (ROI) and adjust bids.
When the Target ROAS update goes into effect on paid search in April 2021, the bidding strategy will become a goal within the Maximize Conversion Value bidding strategy. Google reports that this will not have a significant impact on retail marketers’ campaigns or performance, and will allow marketers to better limit spend and improve efficiency on campaigns that use Maximize Conversion Value.
Target ROAS is available on Google Shopping and paid search.
What It Means for Your Business:
Target ROAS is a tool often used by retailers who are new to Google Shopping or paid search and want to have a presence on these channels without actively managing their accounts. Target ROAS frees up time and resources because Google sets the bids and automatically manages them to a specific but static goal.
On the other hand, Target ROAS is not an ideal solution if you are looking to grow your business on Google Shopping and paid search. You must regularly reevaluate the market and your business to set the most realistic targets when it comes to ROAS. Seasonal shifts or even changes within your own business will not always be taken into account when setting bids with Target ROAS.
Limited insight into the bids and how much or how little Google adjusts them at auction can also hinder your success. Having greater transparency into bids can help you understand market shifts and continually refine your campaigns for success in the future.
If you currently use the Target ROAS bidding strategy in paid search, consider testing the newly expanded Maximize Conversion Value bidding strategy. Start with one or two campaigns at first, and use the same Target ROAS goals you have set in previous campaigns. Closely monitor how performance differs from your traditional Target ROAS smart bidding campaigns to determine the impact of this update.
We will continue to update this article as Google reveals more information about the Target ROAS and Maximize Conversion Value smart bidding restructure.