If you’ve logged into your Adwords account recently, you’ve likely seen an alert from Google announcing changes to Enhanced CPC. For many advertisers, Enhanced CPC is just a settings tweak that may seem inconsequential. However, with the impending changes to how it operates, it’s worth examining in more detail exactly how it affects performance and where it should be used.
Enhanced CPC was announced by Google way back in 2010 as a way to help advertisers improve their ROI without putting more time into their account optimization process. In short, it analyzed every auction in real-time, then, if a conversion was more likely for your keyword, it would raise your bid by up to 30% for that auction. Similarly, if a conversion was less likely for your keyword, Google would lower your bid up to 30%.
While this was a great way for many advertisers to leverage Google’s improving algorithm and vast data store to improve their CPAs, it wasn’t always a success. Enhanced CPC would often lead to reported CPCs that were significantly higher than the bid that was set for a given keyword, particularly when other bid adjustments (RLSA, device, etc.) were factored in, this could get quite expensive.
With the changes that will be rolling out starting in June, the 30% cap that was previously enforced by Google will be removed. The idea behind this change is to phase out the number of active bid adjustments advertisers have to handle, while still giving them a greater return on ad spend. Google has recommended that advertisers watch performance as this product becomes available, and to slowly start phasing out any manual bid adjustments in favor of their algorithm's calculation. As with any automated strategy, we can’t stress enough how important it is for advertisers to watch their account’s performance as these changes take effect.