Google has no choice but to bet big on YouTube
Is Google's manual bidding strategy becoming less relevant?
It goes without saying, despite the rise of TikTok, Google and Facebook (Meta) remain the undisputed titans of e-commerce advertising. With that in mind, every day, we meet incredible business owners eager to take the plunge and invest in one of these two platforms, hoping that the key to growth lies in one of these houses.
The reality is, for every brand, the terms of their lease are different, and which landlord will evict them first often depends on factors beyond their control. The question is knowing which one, and where to pay the rent.
Google’s ecosystem: the challenges with manual bidding strategies for small businesses
Unlike Facebook, conversions on Google naturally come from users with some initial intent to buy. For example, a customer searching for merino scarf or merino wool is already looking for their item of choice, therefore, your job as an advertiser is to bid for the real estate where that customer will click and hopefully convert on your store instead of your competitors'.
One of the great things about Google is its transparency, as it mostly operates like an open-market auction. This means there are plenty of indicators for estimating the cost to achieve a certain number of impressions or clicks on your ads. With auction insights, you can also track your impression share on banded search terms, identify competitors, and get an idea of their estimated bids. This level of transparency helps you better understand market dynamics and plan your campaign strategy. So how do manual bidding strategies work?
For instance, if the top-of-page bid for the non-branded keyword [merino scarf] is $5 per click and the bottom-of-page bid is $3 per click, and you decide to bid $3, what might happen? If you have a 3% conversion rate (conversions per 100 clicks), bidding at $3 per click would cost you $300 for every 100 clicks, resulting in 3 purchases (3% of 100). With an average order value (AOV) of $200, let’s say, this translates to $600 in revenue for every $300 spent, giving you a return on ad spend (ROAS) of 2.0.
A nuance with a manual bidding strategy is finding which keywords at the ad group level are getting you enough impressions. Without enough impressions, you won’t get enough clicks to discover what percentage of your site visitors are going to purchase.
This presents a classic chicken-and-egg dilemma, because in order to find out, you often have to spend more money until you gauge where you’re most efficient at the keyword level. In many cases, Google’s ecosystem inherently disadvantages smaller brands, particularly those with constrained budgets competing in saturated markets where established brands are overbidding to dominate impression share (sometimes at a loss). If your bids are too low to test, you risk failing to generate a sufficient volume of clicks to achieve conversions or reach your target cost-per-acquisition (CPA), all while fixed costs are ticking along. For lower average order value (AOV) products in competitive markets, this is where it’s very challenging.
What’s Google doing about it, and why do D2C brands have to bet big on YouTube?
Google launched its Performance Max (P-max) campaign type in 2021, marking the company's first AI-powered campaign solution designed to reach users across all Google Ads inventory, including channels like Search, Shopping, YouTube, Display, Gmail, and Maps. Meanwhile, the Demand Generation (Demand-Gen) campaign type was introduced in 2023 as part of a broader push to enhance Google's advertising capabilities, particularly by focusing on visual formats aimed at discovery and awareness-based marketing campaigns across platforms like YouTube, Discover, and Gmail.
The aim of launching these new campaign types was to help businesses overcome relying on manual bidding strategies and allow you to give the power back to the algorithm (as we marketers call it). By doing this, you’re asking Google to find pockets where your ads can convert more cost-effectively, instead of relying too much on your own methodologies. However, P-Max bids on both branded keywords, non-branded keywords and also retargets: this means going after users who have previously bought your product. In order to fully exploit sales from net-new customers, account managers need to add branded exclusions to P-Max campaigns to ensure it doesn’t over-leverage existing customers.1
Like Facebook’s Advantage Plus (their AI-driven campaign type), founders are leaning on P-Max, especially as they scale, because of it’s ability to acquire new customers (also known as top-of-funnel users). By leaning harder on Google’s algorithm to find cheaper bids, brands are seeing cheaper cost-per-clicks (CPCs) and, ultimately, cheaper cost-per-acquisitions (CPA).
The fact of the matter is that YouTube has now surpassed Instagram as the second largest social media platform.2 So why does Google have to bet big on YouTube? Because ultimately the only way to convince a user without intent to buy your product into buying your product, is to present it to them - and display networks are the fastest way to do that. If you’re constantly operating under manual bidding strategies, you’ll hit inefficiency thresholds as you scale by paying a premium for conversions. This is also why creative strategy has become a paramount piece of a brands creative workflow, to help better improve creative quality to turn broad audiences into net new customers.
Why Facebook is leading the way is display advertising
Since Facebook’s advertising model isn't driven by a bidding strategy, the platform will spend your allocated budget, ensuring that your creatives reach your audience. Essentially, Facebook offers a method stating: “We’ll deliver the audience, but your creatives must do the heavy lifting.” Since the iOS14 privacy changes, D2C brands are focusing far more on creative strategy and creative design rather than campaign structure. Today, founders are relying heavily on AI driven campaigns (instead of interest-based) and focusing their energy on creative development.
Nonetheless, Facebook’s algorithm has its flaws, functioning somewhat like a “black box” with little visibility past the primary KPI’s. Therefore, without setting specific parameters around campaigns (eg. existing customer caps) data can become skewed or inflated.3 It’s also crucial to understand sales incrementality by breaking down click versus view-through attribution to determine whether Facebooks should truly be credited with those conversions.4
That said, brands, particularly those operating in competitive markets, have found success on Facebook through strong creative execution, compelling unique selling propositions (USPs), and often a superior product experience or impressive lifetime value. For emerging brands, Facebook serves as an accessible gateway to gauge public interest with the hope their efforts deliver results.
Knowing who to pay when it’s time to pay the piper
One question that comes up all the time with founders looking to make the leap into advertising: "Which platform should we start with, Google or Facebook?" The truth is, there’s no one-size-fits-all answer. It all comes down to testing. Factors like your average order value (AOV), how competitive your niche is, your landing page experience, your creative process, whether you're a subscription or a one-time purchase product, the life-time value etc. These are all moving variables.
For brands where the visual appeal plays a major role in showcasing the product’s unique selling points (USPs), or those in competitive niches with lower product value, Facebook tends to deliver faster, more conclusive results. On the flip side, Google can be more efficient for certain brands wanting greater control over where and when your ads appear. There’s also synergy between both platforms. It’s not uncommon that users discover your ad on a display network like Instagram, and then head to Google to search for your brand and complete the purchase through search. In this case, both Facebook and Google could double attribute and claim the conversion as their own.
In the future, and with the rise of AI, will we ever see a world where all you have to do is plug in your URL, your budget, and the campaigns are completely automated? Probably not. Why? Aside from the fact that both platforms benefit from human error, businesses will need to apply differentiating strategies in order to excel in an open-market.
One thing is for sure - Google needs to keep betting big on its display networks, in order to compete with Facebook and TikTok in the long run. The young and reactionary shopper of this technological revolution wants you to sell them their product in the first few seconds and the new display channels are where they’re gravitating.
A branded term is a search term that has your brand name in it. For example people searching for [Zara t-shirts] already know the brand and are likely to discover you organically. Typically brands prefer to spend money bidding on non-branded terms, such as [cotton t-shirts] where they’re trying to acquire new customers.
Shopify’s breakdown of the most popular social media platform (read more)
Existing Customer Caps is a setting within Facebook’s advantage plus campaigns, that allows you to limit the previous customers it shows your ads to. Assuming they’re already in your sales pipeline, brands prefer to have 0-20% caps, to make sure that advantage plus is sending your ads to new broader audiences.
A view-through sale occurs when Facebook attributes a conversion to someone who viewed, but did not click on an ad within a specified attribution window. A click-through sale is when someone clicks on an ad and completes a purchase within that same timeframe. Brands often prioritize optimizing for clicks, as these conversions are generally seen as more credible and directly measurable.