The concept of marginal ROI is foundational to how cross-channel bid optimization works. This is defined as the additional return-on-investment you get from additional spend. In Google Ads, marginal CPA focuses on the cost of driving additional conversions. Maximize conversions bid strategies (with the option of adding a Target CPA), perform best when they can optimize for the most cost-efficient conversions with as much flexibility as possible.
Marginal ROAS focuses on the additional value or revenue you get from additional spend. Maximize conversion value bid strategies (with the option of adding a Target ROAS), perform best when they can optimize for the highest-value conversions with as much flexibility as possible.
Flexibility is critical. When you constrain or narrow where Smart Bidding can look for conversion opportunities, you risk leaving opportunity on the table. This can mean constraining your keyword match types in Search campaigns and limiting Smart Bidding’s ability to find you high-ROI conversions on new search queries. Or narrowing your channel targeting and limiting Smart Bidding’s ability to find you high-ROI conversions on new channels. Your next highest-ROI conversion could come from a channel that you hadn’t even considered.
An analogy that helps explain this is comparing fishing in the ocean vs. fishing in several small ponds. With single-channel campaigns, you may catch some big fish in the pond, but it’s hard to see whether there are bigger fish elsewhere in other ponds that you may be missing. It’s also hard to know where to best spend your resources and budget to optimize performance when you have multiple ponds to manage. With a unified, cross-channel bidding strategy, you can use Google’s AI to “cast a wider net” in the ocean to unlock more relevant auctions that have a strong likelihood of conversion. This makes it easier to catch all of the “biggest fish” that deliver strong ROI.
Narrow targeting often comes from using average ROI to determine whether a performance segment is valuable or not. Looking at average CPA or ROAS for individual segments within a campaign can be misleading. This is because average values don't reflect the cumulative value of maximizing marginal conversions or conversion value in each and every auction.
Find more high-ROI conversions by expanding from a single-channel to a cross-channel bidding strategy
Even if a segment has lower overall ROI compared to others on average and across all auctions, it may still be the most performant traffic with the highest marginal ROI within a single auction. Here’s another example:
Illustrative and simplified auction simulation to show how cross-channel bidding works vs. single-channel bidding
With consumer journeys being as complex and non-linear as they are today, the “best” channel for a customer in one context may not be the best channel in another context. That’s why Performance Max campaigns look across channels in real-time to find the next best opportunity to get you valuable customers. When analyzing channel-level performance for your Performance Max campaigns via the channel performance report, it’s important to keep in mind that the average ROI or CPA of a specific channel doesn’t tell the full story and you should focus on your overall campaign results and holistic performance towards your campaigns’ goals, rather than the individual channels.
