All Industries, Marketing, Webinar Recap

How to Win the Google Smart Bidding Game

Diana Lamirand
October 10th, 2022
9 Min Read
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As a contractor in the trades, you’ve likely dipped your toes into the world of digital advertising, and maybe found success with Google Ads or Google Local Services Ads. But do you know how to play the Google Smart Bidding game?

Historically, Google Ads operated as basically an auction. Businesses said how much they were willing to pay (bid) for customers within a defined geographic area to click on their ad, and Google used its data-based algorithms and calculations to position those companies on the search page accordingly. 

In recent years, however, Smart Bidding gained prominence as the go-to digital advertising investment for growing businesses, and ad experts say Google all but decreed it as the only option available. But what does this mean for the trades, and why is Google pushing Smart Bidding?

“Smart Bidding is really the process of you (contractors and other advertisers) handing over control of your digital advertising to Google to some extent,” explains Johnny Wenzel, ServiceTitan Senior Ad Ops Manager. “And, yes, Google is just thrilled you’re doing this.”

Google Ad users, however, are not so thrilled about relinquishing control of their digital advertising spend, Wenzel says, because they don’t trust Google and view it as this mega corporation that’s only interested in making as much money as possible. 

That may be so, the ad ops manager says, but Smart Bidding still deserves some consideration.

“In the process of you giving control to Google, you need to consider: Will it improve your performance and make you as much money as possible?” Wenzel asks.

In a recent ServiceTitan webinar, Wenzel and Brianna Skiffington, Chief Product Officer at Ad Leverage, a full-service advertising agency in Los Angeles, explain how Google Smart Bidding works, the pros and cons of using it, and steps ServiceTitan is taking to make Smart Bidding smarter.

Whether you control the ad spend for your service business or hire an agency to do it, Wenzel says, it’s important to be aware of Smart Bidding, try to understand how it improves ad performance, then work strategically to achieve success.

“The owners and marketing directors who are the most involved are the ones who see the best results,” he says.

What is Google Smart Bidding?

Much like the general Google Ads buying process, Smart Bidding operates as an auction where multiple businesses in a location say, for instance, “I want to pay money to show people an ad when they search online for the keyword, ‘AC repair,’” Wenzel explains.  

“The ‘auction’ in this case, means we’re just trying to win a click, which hopefully turns into a customer,” he says.

The auction, back when Google Ads was in its infancy, was a very manual process, Wenzel says, as opposed to today’s automated auction Smart Bidding process. Now, advertisers say how much they’re willing to spend to win the auction, then Google’s algorithms and calculations determine who wins.

With manual, a pay-per-click (PPC) ad manager would fill ad campaigns with relevant keywords to bid on, such as “local plumbers” or “HVAC repair near me.” Then they set bids for a specific number of clicks to occur on those keywords.

“They may set the bids within some of the ranges in the data that Google provides,” Skiffington explains. “They might even calculate this number, regardless of the current bids altogether, by taking average ticket, close rate, booking rate, conversion rate, then try and back into ‘What is the maximum cost per click I can afford for this to yield a positive return?’”

The Manual Process looked something like this:

What PPC Managers do to capture people searching for “local plumbers”:

  1. Set the maximum I’m willing to pay for a click.

    1. Reverse engineer the funnel to see how likely the click will convert, how likely the click will book, how likely the click will close, and the average revenue expected.

    2. Google can still go above or beyond this threshold.

Google added additional ways to bid:

  1. Bid more or less based on the device type after looking at historical data.

  2. Bid more or less based on the location ZIP code after looking at historical data.

  3. Bid more or less based on the audience after looking at historical data.

  4. Bid more or less based on the time of day/day of week after looking at historical data.

“While it may seem like extra levels of control (ways to bid) can be good, it can actually be a problem,” Skiffington says. “A human can bid a dollar amount per keyword, then add percentages up or down based on device, audience, ad schedule, demographics, or location, then they have to wait days or weeks to see what’s statistically significant to see whether it’s working or not.

“You just have to be careful, because depending on the bid adjustments and the combination of those bid adjustments that that searcher’s (criteria) is meeting, it can go up to 900% of your original keyword bid,” she adds. “With manual, the bid you are entering is purely for a click, with no guarantee it will convert later.”

With Smart Bidding, Google takes the guesswork and heavy lifting out of setting bids for those Google Ads by automating the auction process and essentially giving online searchers a score based on how likely they are to click on your home services ad and convert (in the Google world, “convert” means they called your business or submitted a form).

“Google Smart Bidding looks at all of these different signals, characteristics, and factors, then uses its big Google brain of artificial intelligence and machine learning to score that searcher,” Wenzel says.

Based on that searcher’s score, Smart Bidding then takes a more aggressive approach toward winning the bid of a high-quality searcher, and makes minimal effort for a low-quality searcher.

Manually bidding on Google Ads vs. Smart Bidding

Which method is better?

“It’s a very personal topic for a lot of people,” says Skiffington, who’s also a ServiceTitan Certified Marketer. “It can be very much an ‘I know better than Google’ thing. But at the end of the day, Google just has a lot more data.”

Here’s what the Smart Bidding Process looks like:

In contrast to the cumbersome manual process, Smart Bidding is actually pretty smart. Humans can’t process the amount of data available at the speed of a Google search.

  • Google’s Machine Learning can analyze 70 million signals (and growing) in 100 milliseconds, and can bid per auction instead of just bidding per keyword. 

  • They are bidding literally on that individual searcher’s conversion probability.

  • Where humans might bid on 10 different things, Google is able to make real-time adjustments per auction based on data not even available in the Google Ads interface.

  • These data-rich signals are informed by Google’s access to (at least) seven different properties, each with 1+billion users. 

    • These include Google, Gmail, YouTube, Google Analytics, Google Android, Google Maps, and Google Chrome. 

“All this to say, the machine is fed by incomprehensible amounts of data being processed in microseconds. It is the only effective way to handle infinite permutations,” Skiffington says. 

Google does everything that used to be done manually, but with a few helpful differences:

  1. It looks across all of its data, not just the data within your account, to make its decisions.

  2. It looks at even more signals; it has more levers to pull.

  3. It applies its algorithm to each individual search, not to all searches for a keyword.

  4. Everything it does is based on machine learning and data; there’s a reason that the best humans can’t beat the best computers at chess.

  5. It’s not a measure of intelligence or even seasoned intuition; it’s much more black and white. It’s about signals + speed.

Is Smart Bidding right for everyone?

The short answer? Maybe not. “There are some limitations with Smart Bidding,” Wenzel says. 

Google is using real-time signals and powerful technology to enhance your ads, which means you’re probably getting a lot more calls and at a more affordable price. But what if none of those calls close or convert to an actual customer?

“This is the main limitation with Smart Bidding,” Wenzel says. “Not all calls are created equal. Just because you’re getting calls doesn’t mean you’re getting business.”

Google tries to score people who search online for your keywords to determine if they’re a high-quality customer, based on their previous online activity. But Google doesn’t really know if a searcher is a high-quality customer or not, Wenzel says, because the data that’s typically fed into Google to signal success is either a phone call or a form submission.

“Google is good at determining if a searcher is likely to call, but not whether they’re a good customer. Machines, artificial intelligence, they do exactly what you tell them to do,” he explains. “You are telling Google to get me more phone calls. That’s a good thing to get more calls, but sometimes cheaper calls are more low-quality calls.”

Low-quality calls might be calls intended for competitors, or calls based on keywords from a brand new neighborhood with no aging equipment, which typically equals smaller repairs and little revenue. In those instances, Google might try to shift your ad spend to get more calls at a cheaper price without knowing the result.

“Google has no visibility into your business. It doesn’t know the difference between good calls and bad calls, they are all just calls,” Wenzel says.

Smart Bidding also doesn’t work the best with small budgets, he adds. If you’re only spending $1,000 to $2,000 on Google Ads, and you’re only getting a couple of conversions a month, then it won’t perform as well.

“Google looks at searchers, looks at your account, and tries to determine if this customer is right for you. It does that as you spend more money and get more data flowing into your Google Ads account. It gives Google more data and more power to make good decisions about your right customer,” Wenzel explains.

“The magic and power behind Smart Bidding is data,” he adds. “If you’re not generating enough data, it won’t work as well.”

It also doesn’t work as well in hyper-competitive markets or large cities with a ton of shops aggressively advertising. The auction pie is just too big, Wenzel says, and it’s just Google battling against Google when more advertisers use Smart Bidding.

ServiceTitan makes Smart Bidding smarter

Recognizing how the biggest problem with Smart Bidding is that Google knows nothing about your business and can only get you phone calls, Wenzel says ServiceTitan set out to offer a solution.

“We have all the customer data, revenue data, etc.,” he says. “We can tell Google, ‘Stop going for phone calls. Go for high-quality calls that turn into revenue.’”

As part of its Marketing Pro full suite of services, ServiceTitan is currently in beta testing for its Ad Optimizer, which tracks calls attributed to a specific campaign, then waits to see if they turn into revenue. If they do, the Ad Optimizer sends that revenue data back to Google Ads, and allows Google to optimize off of those revenue signals.

“You can tell Google to do that, and it will start chasing revenue and not just phone calls,” Wenzel says. “We have applied and experimented with this, and we have seen very good results.” 

ServiceTitan has also found success with sharing its audience data with Google, but not storing or selling personally identifiable information. Google checks those shared customer email addresses to see if they have any matches in their database, and once they do, they analyze your audience list to determine the characteristics of that audience. By doing this, they can target people who exhibit similar behaviors to your existing customers. 

“Every time we do that, send revenue and audience lists, we see ROI increase and wasted ad spend decrease,” Wenzel says.

So, what’s the final takeaway?

“Smart Bidding is better than manual bidding, but it is still limited. If you can find a way to get revenue into that Smart Bidding model, then it chases the revenue rather than the phone calls, and that’s when your PPC and Google Ad ROI can truly be maximized,” Wenzel says.

Read how Ad Leverage found success with Smart Bidding by using these actionable tips from Skiffington’s recent blog:

  • Start with max clicks or target impression share, aggressively with top-of-page bids (high range) that you see in the keyword planner, to develop momentum.

  • Don’t bother on budgets < $1,000, unless it’s a branded or remarketing campaign. For prospecting at that budget, you might only get a click or two a day.

  • Experiment 50% or less before switching, test + prove. Let it run 4 to 6 weeks.

  • Don’t be ridiculous. Set realistic CPA (cost per acquisition) targets based on your market. You can check this in the keyword planner or ask your agency to show you. If your top-of-page bids are $50 and the historical conversion rate is 33%, you should allow ~$150 CPA and refine from there. Don’t be unreasonable and set a $50 CPA and expect any volume or quality, Google will just enter the cheaper auctions and generate low-intent leads. 

  • Don’t make drastic changes if you can avoid it. But if you have to, try to keep it under 20% at a time, otherwise, your campaign goes back into a learning period.

  • Upload customer lists to give Google more signals to work with.

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