> For the complete documentation index, see [llms.txt](https://docs.exads.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.exads.com/advertisers/campaigns/smart-bid-pricing-model.md).
# Smart Bid Pricing Model
Smart Bid is an AI pricing model. Instead of Advertisers setting one price and manually managing it, they set a goal:
1. Target CPA (Cost per Acquisition)
2. Target ROAS (Return on Ad Spend)
Once a goal is set, Smart Bidding AI automatically determines an optimal bid for the Advertisers’ campaigns based on the likelihood of a user converting. It does this by using historical information about the campaign and daily model training based on the most recent campaign data, so its predictions continue to adapt as offers, competition and traffic patterns change.
***
## Why Advertisers Use Smart Bidding AI
* **Stop managing bids zone by zone**: Smart Bidding AI prices each combination of zone, country, device, browser, operating system and other signals individually. Making thousands of micro-decisions Advertisers would otherwise make manually.
* **Bid to a business goal, not a media metric**: Target CPA and Target ROAS optimize toward the outcomes Advertisers are measured on. Advertisers set the target and Smart Bidding AI works out the bid required to reach it.
* **Built-in spend protection**: Smart Bidding AIding can go higher than initial CPM while staying within target CPA or ROAS. Always respecting your spending limits.
* **Always current**: The model retrains daily on the most recent data, so it adapts as your offer, the market and the traffic change.
***
## Target CPA - How it Works
The Target CPA Bidding Strategy finds an optimal bid based on a target CPA the Advertiser wants the campaign to achieve. When an ad request happens, the bid algorithm determines how likely that user is to generate a conversion.
* Where the user is highly likely to convert, and campaign history supports it, Smart Bidding AI bids higher.
* Where the user is less likely to convert, it bids lower.
Some conversions will cost more than the target and some will cost less. Over time, Smart Bidding AI works to bring the average cost per conversion in line with the target CPA that has been set.
For example, an Advertiser setting a target CPA of $10 USD is telling Smart Bidding AI to win as many conversions as possible at an average of $10 USD. To improve performance in each auction, Smart Bidding AI adjusts bids using the contextual signals available at the time of the request.
***
## Target ROAS - How it Works
The Target ROAS Bidding Strategy finds an optimal bid based on a target percentage ROAS the Advertiser wants the campaign to achieve. Smart Bidding AI first calculates the conversion value for the Fixed or Dynamic Conversion Goal specified. For Dynamic value conversions, Smart Bidding AI uses the conversion values it receives. It then analyzes and intelligently predicts the likelihood of the user converting, and optimizes the bid toward the Target ROAS value.
* Where Smart Bidding AI determines that a user is likely to generate a high-value conversion, it bids higher for that ad request.
* Where it determines the user is unlikely to generate a high-value conversion, it bids lower.
{% hint style="info" %}
The Conversion Goal used with Target ROAS must be based on either Fixed or Dynamic values. No Value Conversion Goals cannot be used with this Bidding Strategy.
{% endhint %}
For example, an Advertiser promoting an e-commerce store may want to optimise bids against shopping cart value. If the goal is to spend $1 USD on advertising for every $2 USD of sales, the Advertiser would set a target ROAS of 200%. Smart Bidding AI then sets CPM or CPC bids *(CPC for click-only formats)* to maximize conversion value while working toward that 200% target.
***
## How Smart Bidding AI Works
### What Smart Bidding AI Learns From
Smart Bidding AI trains on the campaign's own impression and conversion history, and scores each ad request against the signals present at that moment.
Signals include but are not limited to:
* Country
* Language
* Device Type
* Ad Zone
* And others
Smart Bidding AI also learns from these signals in combination, not just individually. It builds an understanding of how a specific campaign performs in a specific zone, in a specific country, against a specific conversion goal. This is what allows two Advertisers targeting identical inventory to receive different bids: Smart Bidding AI is not predicting whether a zone converts in general, it is predicting whether that zone converts for that campaign.
### When Smart Bidding AI Starts Optimising
For both Target CPA and Target ROAS bid strategies, Smart Bidding AI begins optimising once it has enough evidence to bid reliably.
Typically, optimisation begins once a campaign has recorded 5 conversions for its target goal, or equivalent spend measured against the target. Eligibility is continuously evaluated. Until a campaign reaches that threshold, it bids at the Initial CPM the Advertiser has set.
Higher conversion volumes allow Smart Bidding AI to converge on the target faster, with campaigns recording 20-30 conversions holding it more consistently.
***
## How to Set Up a Smart Bid Campaign
### Pre-requisites
To select Smart Bidding AI as a Pricing model, an Advertiser needs:
* A verified and appropriately funded advertising account.
* Conversion tracking implemented and firing correctly. See Setting Up Conversion Tracking on EXADS.
* A conversion goal to optimize for.
* For the Target ROAS Bidding Strategy, conversion goals set with Fixed or Dynamic values
{% hint style="warning" %}
Availability and configuration of Smart Bidding AI may vary by network. Advertisers should check with their account manager.
{% endhint %}
### Creating a Campaign
1. Create a campaign using the [campaign instructions](/advertisers/campaigns/creating-a-campaign/step-1-general.md).
2. In [Step 4](/advertisers/campaigns/creating-a-campaign/step-4-pricing-and-limits.md), select **Smart Bid** as the **Pricing** model.
3. Choose a bid strategy:
1. **Target CPA**
2. **Target ROAS**
### Selecting the Target CPA Bid Strategy
1. Enter a **Target CPA** value, such as `$3`.
2. Enter an **Initial CPM** or **CPC** to start bidding and collect meaningful data.
3. Choose a **Conversion Goal**. Create one if none are available.
4. Select your **Bid Optimization** method
1. **Maximize Volume** bids more aggressively to maximize conversions. Use it when starting a Smart Bid campaign.
2. **Maximize Target CPA** bids more conservatively toward the target CPA.
5. Select any other relevant campaign settings required to get your campaign running and click **UPDATE**.
{% hint style="info" %}
The minimum Target CPA value is 0.001.
{% endhint %}
### Selecting the Target ROAS Bid Strategy
1. Enter a **Target ROAS** value, such as `200%`.
2. Enter an **Initial CPM** or **CPC** to start bidding and collect meaningful data.
3. Choose a **Conversion Goal** with a Fixed or Dynamic value.
4. Select your **Bid Optimization** method.
1. **Maximize Volume** bids more aggressively to maximize conversions. Use it when starting a Smart Bid campaign.
2. **Maximize Target ROAS** bids more conservatively toward the target ROAS.
5. Select any other relevant campaign settings required to get your campaign running and click **UPDATE**.
### Choosing an Initial CPM
The Initial CPM is important as it is the bid used before Smart Bidding AI has enough data to take over.
The right value depends primarily on how competitive the campaign's targeting is. For example, an in-stream format requires a considerably higher CPM than a banner format.
***
## Getting the Most Out of Smart Bidding AI
1. **Set a competitive Initial CPM**: The faster a campaign gathers data, the sooner Smart Bidding AI optimizes it. An Initial CPM set too low slows the learning process and delays the point at which the campaign starts benefiting.
2. **Set an achievable target**: An unrealistic Target CPA or Target ROAS will starve a campaign of volume, because few ad requests will clear the bar it implies. Advertisers unsure of a realistic target should start from the CPA their existing campaigns achieve.
3. **Block what is already known not to work**: Where an Advertiser knows an offer does not convert on a particular operating system, country or device, blocking it in the campaign's targeting settings prevents Smart Bidding AI from spending the learning budget confirming it.
4. **Give Smart Bidding AI more than one zone**: Smart Bidding AI's advantage lies in allocating budget intelligently across many placements. Targeting a single zone is supported, but forfeits most of the benefit.
5. **Migrate existing campaigns rather than starting from scratch**: Switching an active Smart CPM campaign to Smart Bidding AI is recommended. Conversion data the campaign has already accumulated is used from the moment the Pricing Model changes, so the campaign starts further along than a new one would.
6. **Allow the campaign time before intervening**: Smart Bidding AI improves with data. Changing the target, the conversion goal or the optimisation method resets the basis on which it has been learning.
7. **Check the settings that cap volume regardless of bidding**: Daily Budget and Frequency Capping both limit delivery no matter how well Smart Bidding AI is bidding. Where a campaign is consistently reaching its Daily Budget, raising it will do more for volume than any bidding change. Frequency Capping matters particularly for high-frequency formats such as banners and native, though raising it should be monitored, since CTR and conversion rate can fall as a result.
***
## FAQ
[What initial CPM should I fill in?](#what-initial-cpm-should-i-fill-in)\
[What if my campaign fails to meet my goal?](#what-if-my-campaign-fails-to-meet-my-goal)\
[Can I target one single zone?](#can-i-target-one-single-zone)\
[What is the required budget?](#what-is-the-required-budget)\
[My campaign needs more traffic. What can I do?](#my-campaign-needs-more-traffic-what-can-i-do)\
[Can I enable Smart Bid on an active Smart CPM campaign?](#can-i-enable-smart-bid-on-an-active-smart-cpm-campaign)\
[How long will it take for my campaign to reach its goal?](#how-long-will-it-take-for-my-campaign-to-reach-its-goal)\
[How can I increase volume on my Smart Bid campaign?](#how-can-i-increase-volume-on-my-smart-bid-campaign)
### What initial CPM should I fill in?
This will depend primarily on the competitiveness of the campaign's targeting. An in-stream format will require a much higher CPM than a banner format, just as a campaign targeting the US will require a higher CPM than India. At the launch of a new campaign, the initial CPM is the equivalent of a Smart CPM campaign which will prevent you from overpaying the traffic.
{% hint style="success" %}
***Tip:*** *Ideally, if you have a campaign with similar targeting, you can refer to it to set your initial CPM. Otherwise, we recommend you to start with a competitive CPM from the beginning, as the faster you get data, the sooner Smart Bid will efficiently optimize your campaign.*
{% endhint %}
### What if my campaign fails to meet my goal?
If your campaign does not reach its goal, here are different actions you can take to solve the problem:
1. Give it time. Smart Bid requires data to efficiently optimize your campaign.
2. Your goal is too ambitious; therefore review your Target CPA/ROAS goals.
3. Your campaign targets many zones (e.g. native), so it will take longer to achieve significant data to reach the first level of zone-level optimization.
4. Your campaign has a bid optimization configured to “Maximize Volume” which is an optimization that is prioritizing volume and the exploration of new traffic segments over the target goal; switch to “Maximize Target CPA/ROAS”. However, it will impact your volume and likely decrease your conversions. ***Do not choose this option too early!***
If you already know your campaign will not perform well on certain targeting segments. For example, if your offer is not compatible with Android Operating System, then adjust the targeting settings of your campaign to block it, so Smart Bidding AI does not spend time in testing those segments.
### Can I target one single zone?
Yes, it is possible to target a single zone, however, Smart Bidding AI is most useful when your campaign is targeting multiple zones.
### What is the required budget?
There is no minimum budget. However, Smart Bidding AI requires data. So, an effective budget will depend on the value of the Target CPA or the conversion value for a Target ROAS campaign. The higher the value, the higher the budget you will need to achieve meaningful data. The targeting of your campaign will also affect the budget. A campaign targeting one single zone will require less budget than a campaign targeting thousands of zones.
{% hint style="success" %}
**Tip:** PPL models are perfect for Smart Bidding AI and limited budget. However, it is possible for advertisers promoting PPS offers with high conversion values to reduce their budget by setting a different goal that is part of the conversion funnel e.g. form submission, email...
{% endhint %}
### My campaign needs more traffic. What can I do?
To increase your traffic, you can increase your initial CPM, allowing you to reach the required conversion volume on zones that have yet to reach the minimum required. Or increase your Target CPA or reduce your Target ROAS to increase your traffic on zones already optimized by the algorithm.
Also make sure to use the Maximize Volume Bid Optimization, which will prioritize conversions volume over the target goal and will allow more budget going towards the exploration of new traffic segments.
### Can I enable Smart Bid on an active Smart CPM campaign?
Yes, and it is even recommended. If your Smart CPM campaign already has conversion data, this will be used from the start by Smart Bid as soon as you switch to this Pricing Model.
### How long will it take for my campaign to reach its goal?
The time will vary depending on the volume of conversions data and actual target goal.
Smart Bidding AI begins optimising once it has enough evidence to bid reliably. Typically, optimisation begins once a campaign has recorded 5 conversions for its target goal, or equivalent spend measured against the target.
The higher the volume of conversions, the sooner Smart Bidding AI will reach your goal. Typically, it takes around 20-30 conversions for Smart Bidding AI to hold your goal more consistently.
### How can I increase volume on my Smart Bid campaign?
* Make sure to use "Maximize Volume" Bid Optimization. That should be the most impactful action, as it will bid more aggressively on optimized segments and also test new segments more aggressively.
* Increasing the Initial CPM will ensure you get the most volume on segments being tested. It will also increase the chances of being the top bidder, which can have a positive impact on campaign performance.
* If you can increase the Target CPA/ROAS then you should. Similarly to Initial CPM, it will ensure you get the most volume, in this case on optimized segments. It will also increase the chances of being the top bidder, which can have a positive impact on campaign performance.
* If you hit your Daily Budget on the campaign or you are close to it, increase it. That's for any campaign, not just Smart Bid.
* Frequency Capping is a very important campaign setting with regards to volume. Especially for high frequency formats such as banners or native. Increasing Frequency Capping should definitely increase volume. However, CTR and CR should be monitored as higher Frequency Capping may result in lower campaign performance. That's for any campaign, not just Smart Bid.
## Case Study
You can see Smart Bid in action in our case study [here](https://www.exads.com/blog/smart-bid-case-study-a-powerful-strategy-to-turn-losing-campaigns-into-winners).
---
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