Constraint has never been a sexy word in the PPC industry. People likely find it a bit limiting. Target, on the other hand, is one of the sexiest words you can associate with pay-per-click because it seems to infer success and accomplishment. Everyone wants to reach their targets, but no one really talks about setting constraints.
It’s not that we don’t want to be a sexy PPC software, but we find intelligence to be the most attractive feature, far better than running with the crowd. That’s why we need to set the record straight about constraints and targets, so that people optimizing their automated PPC campaigns understand once and for all that CPA targets are great, but constraints are what will keep your campaigns under control.
The Definitive Difference
- A target is something you want to achieve.
- A constraint is something that prevents campaigns from surpassing limits.
It sounds like these terms would have nothing to do with one another, but really targets and constraints need to co-exist if you want the best results from your PPC campaigns.
Google’s Conversion Optimizer for example targets a certain CPA. This is awesome, you can decide how much to pay for conversions and the Optimizer tool helps you get as many as possible.
But it’s not quite so simple. What if you don’t have a big budget and you can’t afford to get 1000 conversions even if they only cost $2 each. While having too many conversions is one of the nicest problems you can have, overspend is still a problem for small agencies or advertisers with limited budgets, and that is often what happens.
Setting targets without respecting restraints doesn’t work out as well. That’s like saying “I want to pay $1.25 for each click, but I don’t care how long I’m in the market and I don’t care if I spend my budget.” What good is that doing?
In that case, constraints are necessary.
Looking at it another way, even when budgets are respected, there’s a difference between saying, “I want to spend $5000 this month and I want to get as many clicks as I can,” and saying, “I want to pay $1.25 a click and I want to spend $5000 a month.”
With the second instance, you know that you will get around 4000 clicks, but what you’re asking for in the first instance could translate to much more. This is the idea behind Acquisio’s Bid & Budget Management (BBM) tool. BBM’s algorithms work to determine the best bids to set, which could even be lower than your target CPC had you used Google Conversion Optimizer. Without setting targets you have more possibility of achieving a lower CPC, beyond what you could have conceived with a target CPC.
How Constraints Work
BBM works with both constraints and targets. Achieving goals is important, but respecting the limits of your campaigns is also important, so that’s why BBM works to use both to get the most conversions and clicks possible.
The constraints that need to be respected – and by “need” we mean there is no way, mathematically, that the algorithms can disobey the constraints – are as follows:
- Budget must last all day
- Spend cannot surpass Daily Budget limit
- The average CPC cannot surpass the Max CPC constraint
- Cannot spend more than the Monthly Budget
With all those constraints being respected, BBM is designed to get as many clicks as possible and to get as close to spending your budget without ever going over
Set CPC Constraints not Targets
We have found that the implementation of constraints has produced greater results. Unfortunately too many people misunderstand how to set constraints effectively.
People often associate the constraint to be what they want their CPC to be. There’s a misconception that to pay $2.00, the Max CPC should be set at $2.00. This mistake is what we want to clarify here.
What actually happens is that you limit yourself from bidding higher than $2.00. Imagine you were in a market where others in your industry were bidding up to $10. The optimization solution will stay away from bidding over $2.00 so that consequently, you will only buy the bottom percentage of available clicks, and in some cases no clicks at all if there is no ad space available for that price.
The constraint should be set at a value high enough to give you flexibility in the auction.
Max CPC should be driven by the average. If your average for the last 30 days was $15.00, but your goal is to get it down to $10.00, if you set your Max CPC at $10.00 in an attempt to meet your target, your campaigns will likely suffer because that auction and the available area is probably outside the window that you would like to buy.
We have found that often what is paid is half or even less than half of the Max CPC set.
For more information on the bid versus pay relationship, check out our full blog post with Chief Scientist, Bryan Minor for more details on effectively setting Max CPC for BBM.