Change to AdWords Enhanced CPC removes bid cap to account for location & audience

AdWords users will notice a new alert in their accounts notifying them of changes to Enhanced CPC bidding.

The notice says, “Enhanced CPC (ECPC) bidding now has more flexibility when adjusting your bids to help you get more conversions.” Enhanced CPC (ECPC) automatically adjusts manual bids based on how likely a click is estimated to convert. The bid flexibility of ECPCs has always been bound by the max CPC and would only increase a bid 30 percent above the Max CPC.

With this change, that bid cap is no more.

AdWords will now automatically adjust ECPCs “to fully account for differences in conversion rates across dimensions like audience and location.” Because ECPC is automatically taking location and audience targeting into account, Google says, advertisers won’t have to set bid adjustments any more to account for the dimensions manually.

Interestingly (or oddly), ECPC does not take device into account. Google suggests advertisers may still want to use device bid adjustments.

So what about managing CPCs if the upper cap is removed? Google says the system will try to keep average CPCs below the max CPC “over time.” Advertisers may also see different outcomes depending on campaign type as a result of these changes:

• Search & Display: The ECPC setting will aim to increase conversions at the same cost per conversion. That means there could be changes in spend.
• Shopping: ECPC will aim to increase conversions at the same overall spend. That means advertisers could see CPA changes.

Update: Google says the changes will roll out gradually starting in June.

Here is the full explanation of the changes on the AdWords support page:

H/T Krzych Kaczmarek‏