CPA (cost per acquisition) is a number that denotes how much an advertiser has paid in order to get a conversion. A conversion is the intended action a web visitor has done on the website. The actions could be filling in a form, downloading software or pdf and buying a product.
Target CPA according to google is “Smart Bidding strategy that sets bids to help get as many conversions as possible at the target cost-per-acquisition (CPA) you set. It uses advanced machine learning to automatically optimize bids and offers auction-time bidding capabilities that tailor bids for each and every auction.”
It works by using historical information about campaigns and uses other factors present in the auctions to get conversions. The machine learning tries to find for the best bid at the time of ads are eligible to appear and looking at user’s intention to convert on any site. The bids that Google set are an average in order to get conversions within budget.
The bids are raised and lower to get conversions. There are times the bids are raised and conversions occur while others they are lowered for the same result. Throughout the whole process, the bids will be averagely priced. The raising and lowering of bids take place because there are factors beyond Google’s control e.g. increased competition, website changes and user intent.
If a target CPA is set at $15 Google will set bids to get as many conversion at $15.
How to reduce CPA
Ads serving a larger location will tend to lead to higher CPAs, meaning fewer conversions within the target CPA. Working with a smaller location or market gives the system to a chance to properly optimize so that it provides the best returns on investment.
The higher the quality score (QS) the lower the price that is paid for the auction. QS Of 9 and 10 reduce the cost per bid by 50% while the QS of 1 increase the bid by 400% in order to hold the ad rank. Quality score can be increased by including the keyword in the ad headline, ad copy and landing page. Increasing the QS lowers the amount spent on clicks and also lowers the target CPA
IF functions allow inserting a specific message in the text ad when a condition is met, and a default text when it does not. This makes the ads tailored to each search and more relevant to potential customers.
“Free shipping on mobile orders” is only seen on mobile devices. This effectively should increase conversions on mobile.
Using this function generally increases click-through rates and eventually conversion rate. This, in turn, will reduce the CPA.
The longer Google Ads takes control of advertising the more it will learn how to get more conversions for the advertiser. The increase in the number of conversions will lead to a lower CPA. Click Here for help with your digital advertising