Google AdWords Enhanced CPC vs. Conversion Optimizer

Are you confused by Google’s recent announcement of Enhanced CPC bidding? Judging by the reaction of several PPC specialists at SES San Francisco this week, everyone is a little confused about how this differs from Conversion Optimizer and who should use which feature and why.

Though it’s still early and information is scarce, I’ve pulled together enough of it on Google’s website and a few other sources to get a better understanding of what this means to search marketers and how it can improve your lives.

What is Enhanced CPC?

Enhanced CPC is a new feature available to those who use Google AdWords conversion tracking on max CPC campaigns. It’s designed to increase campaign ROI.

Here’s how it works:

Every single time an ad impression occurs, Google will automatically increase or decrease max CPC or default max CPC values on individual keywords, ad groups, or placements based on the likelihood of a conversion occurring.

To do this, Google will attempt to predict the conversion rate using variables, such as historical performance, match type, specific words present in the query, user location, browser, language, time of day, day of week and many more.

Bid increases will never exceed 30 percent, while decreases have no such limit.

Experimental Design and Split Testing

According to the ROI Revolution blog, AdWords will split the items under management into two equal groups: a control group (not controlled by enhanced CPC) and an experimental group (which will have its bids modified).

If Google finds that its strategy on the experimental group improves results significantly, it will then split the control group in two again and now have 75 percent of items in experimental group and 25 percent in the control group. If results are still significantly better than they are for the control group, enhanced CPC bidding will be applied to 100 percent of the keywords, ad groups, and placements in the campaign.

Early Reactions

Reading some of the early comments, it seems as though the dial may be a little aggressive on lowering bids to the point where some have complained that their traffic dwindled to almost nothing in a few days.

There are also known issues with AdWords Editor, which doesn’t support campaigns with Enhanced CPC at this time. If you have any experience with this new feature, please share with us in the comments below.

Different from Conversion Optimizer?

Reading between the lines, it seems as though Enhanced CPC was designed to give more power to people who don’t care to use Conversion Optimizer because they feel like they “know better” than Google on how their bids are handled.

Marketers who like to be in control will appreciate this feature as it gives them the reassurance that their bids are coherent with their theoretical business values, while giving them the ability to review individual bids manually or with the help of bid management systems.

However, this compromise comes at a cost. Google doesn’t ask you what your business KPIs are, and there is no minimum number of conversions required, which ultimately means changes made here aren’t necessarily going to meet your business goals, and they aren’t necessarily based on representative samples of conversion data.

According to ROI Revolution, however, Google employs a scientific approach by using split test designs to evaluate the impact of its bid changes, which seems to be a reasonable safeguard against total campaign performance destruction.

Which is Better?

The answer obviously depends on your level of comfort with letting Google handle everything in a black box, but the results for Conversion Optimizer have been quite compelling — not for everyone, but the overall consensus of colleagues and clients is that it works quite well in most cases.

While Enhanced CPC is a valuable addition to AdWords, it doesn’t in any way mean that Conversion Optimizer is dead. Far from it.

Care to Share Your Results?

If you can, you should give enhanced CPC a try on some of your campaigns and use the comments below to share your early results with enhanced CPC. We’re all curious to see how this works for others.