Last week, Google AdWords announced something that has been on the wish list of PPC managers for a long time – target return on ad spend (ROAS, but what does it mean?)

Put simply, target ROAS enables you to set automated bidding strategies to target a specific return on ad spend. It’s designed to provide greater flexibility and control over your performance targets and give you a better overall return from your ad spend.

As Google put it, target ROAS helps you maximise revenue by automatically adjusting your keyword, ad group and campaign-level bids to meet a custom target return on your ad spend. As an advertiser, you usually pick your bids on how valuable you believe the search traffic will be to your business. If an enquiry on your site is worth £40 and you think there’s a 10% chance a visitor will enquire, you would be usually be willing to pay up to £5 for each visitor from AdWords.

Previously you would have had to keep re-evaluating your campaign and adjusting your bids based on that 10% chance always changing. Now though with target ROAS Google is able to automate it to some extent using real-time bidding technology that takes into account factors such as location, browser, time of day and operating system to adjust your bids based on your ad’s predicted performance.

This isn’t as straightforward for online retailers as conversion values will vary from product to product, however target ROAS can still be of help. In a ideal world you would be bidding higher on keywords that lead to larger orders and lower for keywords that lead to smaller ones, but this isn’t an ideal world and such a process would be too time consuming and complex to do manually. Instead though target ROAS can assist you with dynamically selecting the right bid for each auction by enabling you to set up conversion values in conversion tracking so that AdWords understands the value of orders placed on your site, and by enabling you to choose the ROAS percentage that catches your business goals.

By applying this strategy to keywords in your account, AdWords will predict the likelihood that a click on your advert will lead to a high-value sale. Based on this likelihood, the system will set unique bids for each click, whilst taking into account your ROAS target. Since this happens automatically and in real time, every time your ad is shown, your bids will be optimised towards your goals, without you having to enter a single manual bid.