How does Google determine CPC rates?

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Some advertisers using Google Ads' Smart Bidding tool for PPC campaigns leave all the steps to artificial intelligence, which is not entirely good.

For example, we have a company targeting a four-fold ROAS (return on advertising investment) with an average AOV (order value) of CZK 5,000. If the artificial intelligence 100% "knows" that a click kuwait mobile database will result in a conversion, Google can charge up to CZK 1,250 for it.

That's quite a lot for one click, but the global internet giant knows well what companies' habits are, so it "without a second thought" lets them pay such amounts.

Fortunately, AI is still not omniscient. So the question is not how much you pay for a click, but what is the value of a high-value click to you.

When you have the opportunity to participate in the same auction and get the same clicks for only 500 CZK, there is a clear improvement. With a fourfold ROAS for just 500 CZK, you show a tenfold return rate. Which makes it clear that Google's overconfidence can push click prices up to a level that is far from corresponding to the set business intention.

As shown by the analysis of several generic campaigns (non-branded), higher revenues occur whenever CPC rates are at a lower level. This makes it possible to set CPC limits to optimize campaign performance . While in some cases the “waste” remained below half a percent, in others up to a tenth of the budget was wasted with deeply below-average revenues.