Google's Smart Bidding Update Could Change How Many Advertisers Manage Target CPA & Target ROAS

Smart Bidding has become the backbone of modern Google Ads. Whether you're running Search, Performance Max, Demand Gen, or Shopping campaigns, automated bidding is now responsible for millions of auction-time decisions every day.

Because of that, even relatively small changes in how Smart Bidding behaves can have a noticeable impact on campaign performance, forecasting, and budget allocation.

A recent update to Smart Bidding is a good example. While it doesn't introduce a new bidding strategy or reporting feature, it does change how certain Target CPA (tCPA) and Target ROAS (tROAS) campaigns behave when budgets become constrained.

For performance marketers, this is worth understanding before making optimisation decisions.

Understanding the Change

Historically, many advertisers noticed an interesting behaviour in budget-constrained campaigns.

Suppose a campaign was running with:

• Daily Budget: €100
• Target CPA: €40

In many cases, Smart Bidding would actually generate conversions well below the configured target, perhaps at €24-€28 CPA, instead of spending aggressively until it reached the full €40 target.

While this often looked like excellent efficiency, it also created uncertainty.

Many advertisers assumed the campaign simply couldn't spend more budget, while others believed increasing the budget would automatically scale performance without significantly increasing acquisition costs.

The latest Smart Bidding behaviour aims to make optimisation align more closely with the actual targets advertisers set.

Instead of consistently trying to outperform the configured Target CPA or Target ROAS in budget-limited situations, Smart Bidding is expected to optimise much closer to the advertiser's defined objective.

In simple terms, if you tell Google your acceptable CPA is €40, the system will increasingly optimise around that target rather than consistently delivering significantly lower CPAs simply because additional budget isn't available.

Why This Matters

At first glance, the change might appear insignificant.

In reality, it affects several aspects of campaign management.

First, campaign forecasting becomes more predictable.

If campaigns optimise closer to the configured target, advertisers can estimate expected acquisition costs with greater confidence when increasing budgets or planning future investment.

Second, bid targets become more meaningful.

Historically, some advertisers intentionally set conservative targets knowing that Smart Bidding often outperformed them. Over time, this created a gap between business objectives and platform behaviour.

A Target CPA should ideally represent the acquisition cost a business is willing to pay, not simply act as a rough guideline that the system consistently exceeds.

Finally, reporting becomes easier to interpret.

When actual performance stays closer to defined objectives, optimisation decisions become less dependent on hidden algorithmic behaviour and more closely aligned with business goals.

Why Some Advertisers Raised Concerns

Not everyone welcomed the update.

Many advertisers had become accustomed to campaigns delivering acquisition costs comfortably below their configured targets.

For them, this behaviour represented additional efficiency without requiring manual intervention.

Naturally, there were concerns that campaigns might now spend more aggressively, pushing actual CPAs or ROAS closer to configured targets and potentially increasing acquisition costs.

Those concerns are understandable.

However, it's also important to recognise the other side of the discussion.

If a business defines a Target CPA of €40, then optimising consistently around €24 may not always provide the clearest picture of available demand, budget limitations, or future scalability.

From a planning perspective, predictable optimisation is often more valuable than unexpectedly outperforming configured targets.

A Practical Example

Imagine two advertisers with identical campaigns.

Campaign Settings

• Daily Budget: €100
• Target CPA: €40

Previous Behaviour

The campaign consistently delivered conversions around €24 CPA while remaining budget constrained.

The advertiser increased the budget expecting proportional growth while maintaining the same acquisition cost.

Instead, performance often changed unpredictably because the campaign had already been operating significantly below its configured target.

Updated Behaviour

The campaign is more likely to optimise closer to the intended €40 CPA.

As budgets increase, performance expectations become easier to forecast because campaign behaviour is aligned with the objective originally defined by the advertiser.

While this may appear less efficient on paper, it often provides a more realistic understanding of what scaling actually costs.

My Perspective

Personally, I'm not convinced this is the right direction.

I understand why Google wants Smart Bidding to optimise closer to the targets advertisers define. Greater consistency makes forecasting easier, creates clearer expectations, and reduces the gap between configured goals and actual campaign performance.

From Google's perspective, that makes sense.

However, from the perspective of someone managing performance campaigns, I believe this update also comes with trade-offs.

One of the strengths of Smart Bidding has always been its ability to outperform expectations when market conditions allowed it. If the system could consistently acquire conversions at €24 against a Target CPA of €40, that wasn't necessarily a flaw. It was evidence that the algorithm had identified opportunities more efficiently than the target required.

Many advertisers benefited from this hidden efficiency.

With the updated behaviour, campaigns are expected to optimise much closer to the configured target. While this makes campaign behaviour more predictable, it may also reduce the upside that many advertisers had become accustomed to seeing.

In other words, predictability may come at the expense of efficiency.

That doesn't automatically make this a bad update.

For businesses that prioritise financial planning, budgeting accuracy, and stable forecasting, this change could be beneficial. Campaign performance should become easier to explain internally, particularly when discussing expected acquisition costs with finance or leadership teams.

On the other hand, advertisers focused primarily on maximising efficiency may feel differently.

If campaigns naturally move closer to Target CPA or Target ROAS rather than consistently outperforming those targets, some advertisers may end up paying more per acquisition than they historically achieved, despite using the same bidding strategy.

Ultimately, I see both advantages and disadvantages.

What I like

• Campaign performance should become more predictable.
• Budget planning and forecasting may become easier.
• Bid targets will more accurately reflect business objectives.
• Scaling decisions should become more transparent.

What concerns me

• Advertisers may lose some of the "bonus efficiency" Smart Bidding previously delivered.
• Higher actual CPA or lower ROAS could become more common for campaigns that historically outperformed their targets.
• Some long-running accounts may need to recalibrate performance expectations after the rollout.
• There is a possibility that advertisers accustomed to lower acquisition costs may perceive a decline in efficiency, even if campaign behaviour is technically more aligned with configured objectives.

Overall, I don't see this as a fundamentally bad update, but I also don't believe it's an obvious improvement for every advertiser.

Like many platform changes, the real impact will only become clear after advertisers have had time to observe how their own campaigns perform in production. Until then, I'd recommend monitoring performance closely before drawing conclusions or making large-scale bidding adjustments.

 

What Advertisers Should Do Next

Rather than making immediate changes across every account, I would recommend reviewing campaigns systematically.

✔ Identify campaigns currently marked as budget constrained.

✔ Compare configured Target CPA or Target ROAS with actual historical performance.

✔ Review whether your bid targets genuinely reflect acceptable business outcomes.

✔ Monitor performance carefully after scaling budgets instead of assuming historical acquisition costs will remain unchanged.

✔ Avoid making multiple structural changes simultaneously, making it easier to isolate the impact of bidding behaviour.

Final Thoughts

Automation continues to improve every year, but successful performance marketing still depends on defining the right business objectives.

This Smart Bidding update reinforces an important principle.

Algorithms can optimise towards the goals we provide, but they cannot replace strategic decision making.

As automated bidding becomes increasingly sophisticated, competitive advantage will come less from understanding which bidding strategy to choose and more from knowing how to define realistic targets, allocate budgets intelligently, and interpret platform behaviour within the broader context of business growth.

For performance marketers, that's where expertise continues to make the biggest difference.