Microsoft Migrating Manual CPC to Enhanced CPC

KLIK Staff

March 1, 2021

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Changes, Recommendations, and Action Items with Bidding UpdatesMarch 2021

Microsoft announced that all current “search, shopping, and Dynamic Search Ads campaigns without any automated bidding strategies in place will be automatically migrated to Enhanced CPC.” (1) In other words, Microsoft is moving away from allowing advertisers to strictly control bids manually. As such, the shift from Manual CPC to Enhanced CPC (eCPC) represents a not-so-subtle nudge toward more automated bidding.

Microsoft will start migrating campaigns to eCPC in March 2021. In addition, beginning on April 5, “any new campaigns created will no longer have the option of Manual CPC,” with the full shift to eCPC completed on April 30. (1)

What is the Impact for Microsoft Advertisers?

The primary reason Microsoft cites for this migration is that “Advertisers using eCPC achieve 5-10% more conversions while maintaining their cost per acquisition (CPA).” (1) Perhaps fittingly, while the expected benefits from eCPC compared to manual aren’t very drastic, neither are the differences in how the two bidding strategies operate.

How is Enhanced CPC Similar to Manual CPC?

  • Setting Bids: Advertisers are still able to set ad group and keyword-level bids.
  • Campaign and Ad Group Level Adjustments: eCPC incorporates advertiser-set bid adjustments (based on factors such as device, age, location, audience, and others) into the starting point from which it will make its adjustments.
  • Universal Event Tracking Not Required: As eCPC uses signals from across the Microsoft network in adjusting bids, UET is not necessary for the strategy to work. However, Microsoft notes, “[f]or the best results, we strongly recommend using Enhanced CPC in conjunction with conversion tracking (a UET tag and a conversion goal).” (2)
  • Compatibility with Third-Party Bid Management Tools: Since eCPC still allows advertisers to set bids, it is compatible with third-party tools that do just that.

How Does Enhanced CPC Differ from Manual CPC?

  • Real Time Bids: While eCPC allows advertisers to set bids, it can adjust them up and down in real time based on numerous signals to increase the chance of conversion.
  • Query-Level Optimization: Aside from real-time bids, the primary advantage of eCPC is the ability to adjust bids in real time based at a more granular level than Manual CPC. Whereas Manual CPC optimization stops at the keyword level, eCPC is able to look one step further and optimize based on the actual query served and as such, it bids with more information than Manual CPC is capable of.

Intricacies of Enhanced CPC

As mentioned above, Enhanced CPC uses manually-set bids and adjustments as the “starting point” from which it makes its real time adjustments. From this starting point, it can adjust bids “up to 30% higher on searches that are more likely to convert and up to 100% lower on searches less likely to convert.” (3) To see how these types of adjustments could affect manually set bids and adjustments, see the table below.

While eCPC does extend the range of actual bids values from the manually-set bid, advertisers should not witness any significant changes in average CPC over larger time frames. In fact, Microsoft specifically states that “over the long haul… we will try to make sure that your average CPC is not higher than your bid.” (3) Similarly, with average CPC remaining relatively the same over time, advertisers shouldn’t expect any drastic changes in spend, all else constant.

What to Expect

Overall, it’s likely the combination of these processes and limitations within eCPC that will keep spend and CPCs relatively constant. Simultaneously, within that spend and CPC consistency, slight improvements in real time bidding should help advertisers realize the 5-10% increase in conversion that Microsoft cites as the reason for moving away from Manual CPC and toward Enhanced CPC. In other words, this migration should not be a major cause for immediate alarm, but rather taken as a warning that automation will continue scaling within the platform, and manual management will become less sustainable, and, in the case of this rollout, less possible.

Important Considerations for Enhanced CPC

As with any change such as this, the first step is to begin testing segments of the business with this new bidding strategy to determine the potential impact on the business before diving in headfirst.

Recommendations in Preparation for eCPC

  • Review Negative Lists: With the system handling final bids on queries, it will be imperative to ensure that keywords are not mapping too widely. Although eCPC working well would entail it automatically bidding lower on less-relevant queries, it can nonetheless benefit from the added context that human marketers possess.
  • Review Do Not Drop Lists: Ensure that terms that absolutely must be in queries for keywords to serve in fact are. This especially protects higher-bid keywords from being bid down on queries that really shouldn’t map to them in the first place.
  • Limit Redundant Keywords: Similar to the recommendations above, make query mapping as easy for eCPC as possible. The more overlap that exists between which keywords the same query could map to, the more difficult it is for an automated bidding system to utilize other signals and know how to bid. The less redundant the keyword set, the more better eCPC should be able to optimize to queries.

Phenomena to Monitor in Testing

  • Match Type Performance: Are match types affected differently by the change in bidding strategy?
  • Ad Type Performance: Does eCPC improve or worsen the performance of static versus responsive ads?
  • Query Mapping: Are a wider or narrower assortment of queries appearing in reports, and should additional keywords be added to accommodate these queries? Use the comprehensive search query visibility within Microsoft Ads to monitor these changes.
  • Bid Variance Within Test Campaigns: Are certain keywords consistently getting average CPCs higher than where manual bids are set? And vice versa for poor performers.

Where to Go From Manual CPC

In rolling out this migration, Microsoft was kind enough to provide the following decision tree, illustrating how advertisers can look to pivot from Manual CPC towards Enhanced CPC or other bidding strategies.

(1)

We can break this down at each juncture to see what steps make the most sense for advertisers. The first question to address is whether or not an advertiser has, or would like to implement, Universal Event Tracking (UET). The upsides to having or adopting UET are the additional benefits and options that it affords: the ability to analyze conversions and performance in the Microsoft platform, automated bidding strategies tied to conversion goals, and additional signals for the system to use when optimizing with eCPC. On the other hand though, if there are compliance or other reasons blocking such an adoption, there are still some choices that remain.

Non-UET Bidding Strategies

If not adopting UET, the two current options are Maximize Clicks and Enhanced CPC. As noted on the chart, eCPC is the recommended option if using manual, in-house, or technology provider bidding. The reason for this is that eCPC still allows the advertiser to set bids. On the other hand, if an advertiser is comfortable giving more control to Microsoft in regard to bids, spend rate, and ad rotation, Maximize Clicks could be an option to drive a lot of traffic to a desired website. Still to be rolled out is the Target Impression Share strategy, which would also turn bidding over to Microsoft and allow advertisers to set a target impression share for the system to maintain through its own bidding.

UET-Bidding Strategies

On the other hand, if adopting, or already using UET, there are a few more options in regard to bid strategies. Similar to non-UET, eCPC is still a viable option and should only benefit from the conversion data available with UET. Moreover, if looking to have the most control over bidding, this is the only option that allows the advertiser to still set bids.

If comfortable turning bidding over to Microsoft though, the next question is what type of goal one would like Microsoft to optimize toward. The revenue-geared bidding strategy is Target Return On Ad Spend (ROAS). In this case, the advertiser can set the expected ROAS and allow the system to spend freely in alignment with that goal. Likewise, if the goal is conversions, a Target Cost Per Acquisition (CPA) strategy would operate very similarly, in that it would allow the system to spend freely in pursuit of a set CPA. Also in the conversion goal category is to Maximize Conversions. This would operate in the same fashion as above in the non-UET section. The only difference when UET is incorporated is the greater amount of information integrated into the system’s signals, which allow it to bid better.

One important note here is that jumping from something like Manual CPC straight to a conversion or revenue-goal driven bidding strategy poses a number of risks, the greatest likely being uncertainty in a number of areas such as spend, costs, performance, and more. As such, eCPC can function as a stepping stone from more manual toward more automated bidding, but the imperative practice is to test each strategy before turning over significant portions of an account or business to fully automated bidding. Regardless, with the many automation-minded nudges from search platforms over the past couple of years, now certainly the time to test more automated strategies, as the options for manual bidding are likely to continue fading.

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