How does value-based bidding work?

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Lata Bala

Infographic titled “How Value-Based Bidding Works in Google Ads,” featuring sections on definition, how it works with machine learning, its benefits, and a comparison with other bidding strategies like CTR and impressions. Includes icons for AI, value, and bidding.

Recently, I took the Google Ads Search Certification exam and successfully passed with a score of over 90%. It’s not bad, so I am very glad to have passed the exam. Now, I will elaborate on one Google Ads Search question, explaining why it is correct and why the others are incorrect. Let’s start.

Question:

How does value-based bidding work?

  • Value-based bidding is a Smart Bidding strategy that uses machine learning to drive the highest click-through rate possible, by bidding for conversions that drive business objectives.
  • Value-based bidding is a Smart Bidding strategy that uses machine learning to drive the highest conversion value possible, by bidding for conversions that drive business objectives.
  • Value-based bidding is a Smart Bidding strategy that uses machine learning to drive the highest target impression share possible, by bidding for conversions that drive business objectives.
  • Value-based bidding is a Smart Bidding strategy that uses machine learning to drive the highest impressions possible, by bidding for conversions that drive business objectives.

Here is the correct answer:
✅ Value-based bidding is a Smart Bidding strategy that uses machine learning to drive the highest conversion value possible, by bidding for conversions that drive business objectives.

If you are interested, you can take the exam on Google Ads Search Certification.

Let’s start with why this is correct — and why the others are not:

✅ Correct Answer Explanation:

Value-based bidding is a type of Smart Bidding strategy in Google Ads that focuses not just on getting more conversions — but on maximizing the value of those conversions.

That means:

  • Google’s AI adjusts bids in real-time based on the estimated conversion value
  • It prioritizes users most likely to complete high-value actions (e.g., larger purchases, premium subscriptions, high-revenue leads)

Business objective: Drive maximum revenue (or ROI), not just conversion count.

❌ Why the Other Options Are Incorrect:

OptionWhy It’s Incorrect
Click-through rate (CTR)❌ CTR measures ad engagement, not business value. Value-based bidding is not designed to optimize for clicks — it’s for conversion value.
Target impression share❌ That bidding strategy aims to maximize visibility (impressions), not conversion value. It’s used for brand reach, not ROI.
Highest impressions possible❌ Focusing on impressions doesn’t guarantee value. Value-based bidding is meant to maximize value per conversion, not exposure.

Real-Life Example:

A furniture retailer runs two campaigns:

  • One optimized for conversions (Goal: get as many form fills as possible)
  • One using value-based bidding (Goal: prioritize users likely to buy high-ticket items)

The second campaign uses conversion value (e.g., $2,000 sofa > $300 chair) and tells Google to spend more on high-value prospects.

➡ This leads to higher revenue, even if total conversions are fewer.

Summary Table:

Strategy TypeOptimizes ForGoal
✅ Value-Based BiddingConversion ValueMaximize business revenue
❌ CTR BiddingClicksBoost engagement
❌ Impression Share BiddingVisibilityMaximize top-of-page presence
❌ Impression BiddingViewsImprove ad reach, not ROI

Conclusion:

Value-based bidding helps businesses get the most return on ad spend by telling Google to:

  • Focus on valuable users
  • Prioritize revenue-driving actions
  • Use real-time data and machine learning to optimize bids

It’s the smart choice when not all conversions are equal — and when business value matters most.

Now, if you are ready, then you take the Google Skillshop test for the Google Ads Search Exam. If you want more questions about the Google Ads Search Certification Exam, follow.