Available in Beta form since March, Google officially launched the Enhanced CPC bidding feature within AdWords on August 16th. The purpose of this new automated bidding tool is to help improve ROI for AdWords campaigns that use manual bidding by increasing conversion volume while reducing overall Cost per Acquisition and the amount of time spent manually managing keyword bids.

How it Works:
Enhanced CPC looks at your campaign’s historical conversion performance and adjusts your keyword’s Max CPC bid up or down based on the likelihood of a click leading to a conversion. Max CPC bids will be raised up to 30% if the likelihood of conversion is strong, while there is no limit to the decrease applied to non-converting keywords. In order to use this tool, you must be using Google’s Conversion Tracking for your campaign.

Every time there is an auction for one of your keywords, the Enhanced PPC tool calculates the likelihood of conversion based on historical conversion data and a number of other factors including: match type, specific terms present in a searcher’s query, user’s location, browser and time of day among others.

Methodology:
According to the ROI Revolution blog, initially AdWords will split the campaign for which you have enabled Enhanced CPC 50/50 into a control group (not using Enhanced CPC) and a test group (Enhanced CPC enabled). If the results of this initial test are positive, AdWords will once again split the control group, so that 75% of your campaign is in the test group (using Enhanced CPC bidding), while 25% remains in the control group. If the results are still positive following this secondary test, Google will enable Enhanced CPC bidding for the entire campaign.

Difference between Conversion Optimizer and Enhanced CPC:
The key difference between these automated bidding options is that Enhanced CPC works with the Max CPC you set at a keyword level which can be manually optimized as much as you like while Conversion optimizer uses CPA bids set at the Ad Group level which offers greater ability to impact ROI through the ability to set a CPA target.

It’s too early to judge what long-term effect this new feature will have on campaign performance, so stay tuned for updates.