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September 27, 2023

The Complete Guide to Value-Based Bidding: An Actionable Summary

Ido Wiesenberg
CEO and Co-Founder

Unless you've been living for the last couple of years under a virtual rock in the metaverse or something, you know all too well about the global business paradigm shift where 2020's "growth-at-all-costs" mentality made way to the chase for profitability and efficiency-first approach.
And if you're in digital marketing, it means that raking in "conversions" is just not an appropriate business model anymore.
So, what is? Well, please welcome the age of the right conversions.
In other, more practical words, the days of managing and measuring your ad campaigns based on indirect indicators such as CAC or (first purchase) ROAS are gone, and it's time to get on with the program.
It's time for Value-Based Bidding.
If you already know what it means and are ready to dig deep and move forward with implementing this strategy, we got you covered - with the most comprehensive and practical guide you can find.
Get your free copy of "The Complete Guide to Value-Based Bidding: The Transition from CPA to pROAS Campaigns" here.
If you're still higher up the consideration funnel and currently carry only medium-level of intent, then this blog is just the right thing for you.
Here, without getting too technical and without diving too deep into all the bits, bytes, and in-betweens, we'll give you a quicker, more high-level rundown of what Value-Based Bidding is and what it can mean for you, and we'll even give you a glimpse of what it takes to usher in this new era of digital advertising - and what it may look like (cause a bit of FOMO never hurt anybody, right?).

What is Value-Based Bidding?

Value-Based Bidding (VBB) is a game-changing approach to digital advertising on Google that prioritizes high-value customers and optimizes for Lifetime Value (Meta calls a similar approach Value Optimization). Unlike traditional methods that focus on indirect metrics like clicks, impressions, and even "conversions," VBB allows you to earmark the true value of your users, which will enable the networks to bid on each user (and similar ones) according to their individual value to your business.
This method is the ultimate way to leverage your data for improved performance.
By optimizing advertising efforts for these high-LTV customers, Value-Based Bidding  enhances ROI, builds stronger customer relationships, and ensures that every advertising dollar is spent efficiently. It's a precise and customer-centric strategy that transforms digital advertising by leveraging the power of data and AI.

Five Reasons Why Value-Based Bidding is Important

  1. Maximizes ROI: By using direct indicators for value for campaign optimization instead of indirect ones, the results of the campaign and the ROI improve dramatically. 
  2. Reduces Ad Waste: VBB minimizes ad waste by avoiding irrelevant impressions, clicks, or even weaker conversions, making your advertising campaigns more cost-effective.
  3. Makes the Most of Your Data: advanced value-based bidding methodologies can VBB leverage artificial intelligence (AI) for data analysis, lifetime value predictive modeling, and smart bidding strategies - all based on actual data gathered from your customer base, ultimately enhancing precision and efficiency in advertising.
  4. Enhances Customer Relationships: By prioritizing high-LTV customers, VBB fosters more substantial relationships with these valuable patrons, leading to sustained revenue growth.
  5. Drives Brand Loyalty: High-LTV customers are not only repeat buyers but also brand advocates. They're more likely to recommend your products or services, contributing to organic growth.

How Can AI Improve Value-Based Bidding?

Let's start by clarifying a possible misconception - Value-Based Bidding doesn't always require predictions or AI. It can become a game-changer in digital advertising because, unlike traditional bidding approaches that rely on one conversion type, one can apply VBB by optimizing for several funnel stages (implemented as separate conversion actions/custom events) together. It allows you to assign a different (static) stage-specific value to each funnel stage (e.g., $5 for a signup, $20 for a trial, $100 for a subscription, etc.). This enables advertisers to fine-tune their bids at each customer journey stage.

However, the efficiency achieved here is sometimes too focused on the short-term ROAS, not the lifetime ROAS. It's not only not ideal, but it's also completely irrelevant for some businesses. In addition, the manual allocation of static value is not the most accurate which impacts the ability to optimize according to real value which decreases the ROI. 

Leveraging AI-based models to generate lifetime value predictions outperforms static  models, increasing your ROAS by 20-40%. (yup) AI models create mathematical modeling of the behavior of your users based on historical data and allocate a predicted value for each new user. Voyantis’s AI-powered Life-Time Value predictions are highly accurate, with an accuracy of over 90%.

Additionally, AI lets you strategize timing for better conversion impact - as adding an AI layer that focuses and excels at balancing the early sending of signals to impact the conversion window vs. waiting for enough data to accrue for the model to have the best accuracy is a fine art no human mind is capable of mastering. Reverse engineering the best timing strategy is paramount for success.

How to Get Started with Value-Based Bidding?

There are a few steps to consider when making the first steps in value-based bidding. For the complete guidelines, we highly recommend you check the guide (chapter 2.2). Sharing here a few tips to consider:

1. Choose Single or Multiple Conversion Event(s):
You can either assign distinctive conversion values to different funnel steps ($1 for site visit, $10 for signup, $20 for newsletter registration, $100 for purchase, etc.) or choose to send a single conversion action with a dynamic value (so, the conversion event can be signup, but assign different values to different kind of signups).

2. Build Dynamic Rules for Conversion Values:
To enhance the accuracy of your bidding strategy, create rules for conversion values based on specific criteria.

3. Pick the Right Bid Strategy:
Google Ads offers various bid strategies, such as tROAS and Maximize Conversion Value (MCV). Choose the bid strategy that aligns with your campaign goals and business objectives.

4. Find an Accurate Representation of the value of each user:
The secret lies in the ability to translate users behavior into precise mathematical models to quickly and accurately predict the lifetime value of each user to be signalled back to the ad network.

5. Strategize Timing with AI for Conversion Impact:
Add an AI layer that focuses and excels at balancing the early sending of signals to impact the conversion window vs. waiting for enough data to accrue for the model to have the best accuracy.

Going the Value-Based Bidding Way: Implementing Impact

As you can imagine, that’s just the tip of it, and there’s a lot more where that came from. Value-Based Bidding isn’t the simplest strategy to implement. It requires sophistication and commitment to what is indeed a new age in digital advertising, yes, but also to not fall behind the competition.
That’s why our especially actionable guide has more checklists and tips for you, things like an "Assessing Your Readiness for Value-Based Bidding" checklist or "Tips for Excellent Value-Based Bidding."
In it, you can find a few real-life case studies and results from some very happy, inspiring Voyantis clients that achieved results like "4.2x lower cost per acquisition of highly engaged users" and "38% ROAS increase."
If downloading and reading through it sounds like the best thing you can do next, you're not wrong. Find the complete, incredibly actionable guide here.
And reach out to the VBB-loving, enthusiastic team here at Voyantis if you feel ready to implement impact.

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