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For those of you who are too busy to optimize your campaigns manually, Google offers a useful tool to help you optimize your bids to get the most conversions out of your campaigns: Conversion Optimizer

To start off, let’s just review what Conversion Optimizer is, here’s Google’s definition:

The Conversion Optimizer is an AdWords feature that uses your AdWords Conversion Tracking data to get you more conversions at a lower cost. It optimizes your placement in each ad auction to avoid unprofitable clicks and gets you as many profitable clicks as possible.

How it works:

With the Conversion Optimizer, you bid using a maximum cost-per-acquisition (CPA), which is the most you’re willing to pay for each conversion (such as a purchase or signup). Using historical information about your campaign, the Conversion Optimizer automatically finds the optimal equivalent cost-per-click (CPC) bid for your ad each time it’s eligible to appear. You still pay per click, but you no longer need to adjust your bids manually to reach your CPA goals and can benefit from improved return on investment (ROI). To calculate the optimal equivalent CPC bid, the Conversion Optimizer first calculates a predicted conversion rate for each auction, taking into account your ad’s conversion history, the keyword’s broad match query, the user’s location, and the conversion rates of Google’s search and Display Network partner sites. The feature then generates an ad rank by combining your CPA bid, quality score and predicted conversion rate.

Sounds great, right? Well, almost.

One thing to keep in mind when using conversion optimizer is that it works on the campaign level, so the recommended CPA will be calculated based on the average historical performance of the campaign.

Why is this important?

Imagine you sell a range of different couches, from Ikea-level to designer name brand, and they are all being advertised under the “couch” campaign. Theoretically speaking, lower priced items will convert at a lower CPA while higher priced items converts at a higher CPA. The higher CPA to convert a more expensive item doesn’t bother you because you also make more money from it. And at the end of the month, you sell about an equal amount of low end and high end couch.

Now that conversion optimizer is in place.

With the way it works, the recommended CPA will probably be somewhere in the middle of the low end couch CPA and high end couch CPA. This might not affect the sales of low end couches, but the number of high end couches sold will probably be negatively affected because the recommended CPA is lower than what it used to be, and keywords will be forced to show up at lower positions to keep the desired CPA. You get the picture?

Before applying conversion optimizer, it’s best to assess your campaign and break down your ad groups into categories based on their CPA. Ad groups with similar CPA should be grouped into their own campaigns. Wait for a few weeks for your newly created campaigns to gather data, then apply conversion optimizer.

This way, the recommended CPA won’t be too far off from the optimum level between each ad groups, and all keywords can also be shown at their optimum position.

Pitstop Media offers ROI based internet marketing services. If you need help with PPC management or PPC optimization please contact us for a free, no obligation quote. We’ve helped companies reduce their paid advertising cost by as much as 48% and increase AdWords conversion rates by as much as 410%. See our internet marketing case studies.