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CPC vs CPA and when to adjust bidding

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# 1
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Hey Adwords Community,

 

I am a potential advertisier (becoming Google Certified). I have a couple questions that I keep going through and maybe I can get some further clarification here.

 

CPC vs CPA: I understand CPC bidding and CPA bidding. With CPA bidding, you are ONLY charged for a conversion (not a click). With that being said, is the CPA bid typically higher than CPC and if so, how much higher (this may depend upon industry)? CPA seems like a better return on investment option to me, is this correct?

 

It appears to me that you're guaranteed profit with CPA bidding. Is this now the most popular choice? Tell me some negatives of CPA because I can't think of any. 

 

Other question: When do you adjust bidding? (For CPC and CPA). 

When is an appropriate time for an increase in bidding (when your CTR is low, etc.) or decrease and for CPA, when is a good time for increasing the bid or a decrease (when impressions are low, etc.). What is the general rule of thumb on this? An article would be great. 

Thanks for your time.

 

Best Regards,

Cole Lusby

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Re: CPC vs CPA and when to adjust bidding

Top Contributor
# 2
Top Contributor

Hi Cole,
When it first was announced, that's how I thought it worked too Smiley Happy FORTUNATELY, it doesn't. Otherwise we'd be advertising on every keyword imaginable and Google would be a horrible place to be Smiley Happy

 

Google is removing this confusion in the coming weeks.

As per: https://support.google.com/adwords/answer/2472713?hl=en

 

Cost-per-acquisition (CPA) bidding

In January 2014, we'll be removing the ability to set a max CPA bid in a campaign. At the end of the first quarter of 2014, we'll begin to automatically switch campaigns that are still using max CPA bidding to target CPA bidding. Learn more
 
 

Re: CPC vs CPA and when to adjust bidding

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# 3
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Hey Dave,

I am unsure as to what you're talking about. I asked several questions; could you shed some more light on this? What doesn't work like this-- CPA bidding? Then, how does it work? I read that article and it isn't very helpful.

Thanks,
Cole

Re: CPC vs CPA and when to adjust bidding

Top Contributor
# 4
Top Contributor
Hi Cole.
Max CPA bidding was that you'd set a maximum CPA and Google would adjust it's bidding on various keywords to TRY to achieve that (using the conversion optimizer tool). This doesn't work very well if you set your CPA to $0.01 for example. The conversions are never guaranteed at this price.

This is being replaced with a "target" CPA which was always available but will be the only option available going forward in 2014. This is where you set a maximum CPA and Google will TRY to stay within that limit. It could go over or it could go under.

They're both really similar.

Regarding your second question, the answer is that you don't. The conversion optimizer changes the bidding for you. You ONLY change your max or target CPA. As the article says: "You still pay per click, but AdWords will automatically set your bids to help you get more conversions, saving you effort and time."

"The final amount you're charged

Your actual CPA depends on factors outside Google's control such as changes to your website and ads, or external factors such as increased competition. So it's possible that your actual CPA may exceed the max. CPA or target CPA bid you specify. Conversion Optimizer uses historical conversion data to predict the likelihood your ads will convert. If your actual conversion rate turns out to be lower than the predicted conversion rate, your actual CPA may exceed your max. CPA or target CPA bid. But because the system is designed to adjust over the long term, the likelihood of your actual CPA exceeding your bid decreases the longer you use CPA bidding."

Does that make a little more sense?

Re: CPC vs CPA and when to adjust bidding

Top Contributor
# 5
Top Contributor
Just to underline the point raised in your initial question: On the search network, AdWords is a PPC system, You are charged per click. CPAs are algorithms used to optimize the cost per click
Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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Re: CPC vs CPA and when to adjust bidding

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# 6
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Hey Dave,

I do understand more. So CPA is really CPC + CPA? (Assuming the click is $1.50 and the conversion is $1.50); it is possible to pay $3.00 for a conversion). Is my understanding correct? What are the advantages to this? Are advertisers using CPA or CPC?

Could you shed some light on my other question too please?
When do you adjust bidding? (For CPC and CPA).
When is an appropriate time for an increase (or decrease) in bidding (when your CTR is low, etc.) and for CPA, when is a good time for increasing the bid or a decrease (when impressions are low, etc.). What is the general rule of thumb on this? An article would be great.

Dave thanks for your time. I look forward to continuing to get answers from you.

Best Regards,
Cole
Marked as Best Answer.
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Accepted by topic author Cole L
September 2015

Re: CPC vs CPA and when to adjust bidding

Top Contributor
# 7
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Hi Cole,
Yes, that is correct.

Regarding your second question, I already answered it Smiley Happy There isn't an appropriate time to edit your CPC. Google does it automatically for you. The CPA bidding simply changes your CPC automatically for you to "best guess" the correct bidding formula to achieve your target CPA.

If you read the first article that I posted, it goes into detail on this. I know you said that you read it, but I'd recommend that you read it again. It makes a little more sense the second time around.

Re: CPC vs CPA and when to adjust bidding

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# 8
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Hey Dave,

You're right; a second or third read helps a lot after your explanation.

Are advertisers (like yourself) using CPC or CPA more for its' clients? It appears CPA would be more (per click bid) than CPC, although it produces more results.

Thanks,

Cole

Re: CPC vs CPA and when to adjust bidding

Top Contributor
# 9
Top Contributor
Hey Cole.
Glad it's a little clearer.

To be honest, I NEVER use it. In the past, when I have, it's always come in far over my target CPA to warrant even trying to tweak. I can get better results from manual bidding.

It also doesn't necessarily produce "more results", quite the opposite really. I think you'll understand it a lot better if you turn it on for a test period. I much prefer total control as CPA bidding relies too much on looking back rather than testing and looking forward.

Re: CPC vs CPA and when to adjust bidding

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# 10
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I also don't use a CPA. I tried once, lost control over costs, and abandoned the option.
Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
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