Profit Optimization for Smart Bidding – Are…

Google dropped some 🔥 news at GML 2024 with their new Profit Optimization feature for Smart Bidding. It’s a game-changer for Performance Max (PMax) and Shopping campaigns, promising to prioritize profit over revenue.

🔑 The Basics:

Instead of just focusing on revenue (hello, ROAS), Google’s AI now targets profit. It subtracts Cost of Goods Sold (COGS) from the revenue to get gross profit. Smart, right? But, it only works if you feed Google two critical data points:

  • Conversions with Cart Data (CwCD) – Think detailed order insights.
  • COGS Attribute – The actual cost of the items sold.

The good news? No extra learning period! The bad? Only 5% of advertisers are ready. Yep, COGS data submission is that low, mostly because people are hesitant to share their cost data with Google. 🤔

Adoption of COGS and CwCD in Q1 2024
Source: Smarter Ecommerce proprietary data 2024

Caveat: Our data shows 40% CwCD adoption but CwCD is part of our standard smec tracking implementation so we’ve certainly skewed this above market.

🔍 Why Should You Care?

Early adopters could ride this to serious profit gains. But here’s the catch: getting your COGS data in order is a hassle and a lot of businesses are…not ready.

So, are you going to embrace profit-driven bidding or let this one pass by? 👀

Profit Bidding Optimization at smec

Profit Bidding Optimization at smec revolves around aligning ad spend with profitability rather than just revenue goals. In essence, it’s about making smarter, profit-focused decisions for Google Shopping or Performance Max (PMax) campaigns by using business-critical data. This shift allows online retailers to overcome challenges like low margins and rising ad costs.

The goal is to not just focus on traditional ROAS (Return on Ad Spend), but to steer campaigns towards products that contribute the most to profitability. Here’s how smec achieves this:

  • Multi-Dimensional Product Segmentation: By using smec’s tools, advertisers can segment their products based on profitability, seasonality, or other business-relevant metrics instead of just past sales performance​​.
  • Profit Data Integration: smec integrates gross profit per transaction into campaign strategies. By calculating profit instead of just revenue (taking costs of goods sold into account), retailers can optimize their bids to focus on high-margin products​​.

This approach helps e-commerce advertisers focus their resources on the most profitable parts of their inventory, ensuring that campaigns drive more sustainable and long-term growth​​.

Get in touch with us to learn more about our solution.