Discover how two bidding strategies can help you fine-tune your Google Ads campaigns for high-value actions and stronger profitability.
In Google Ads, profitability is always the core objective, pushing PPC marketers to constantly refine how they bid.
Over the past few years, value-based bidding (VBB) has become a proven method for optimizing toward high-value conversions.
However, the financial challenges of 2025—driven by uncertain markets and tighter margins—make profit-based bidding (PBB) more critical than ever.
When every budget decision matters, focusing only on conversion value may fall short.
Are your campaigns optimized for actual profit, or are you still prioritizing actions that don’t fully strengthen your bottom line?
While VBB is widely adopted, one key question remains: is it enough to assign values to conversions, or should advertisers shift to bidding directly on profit?
This article explores:
- How value-based bidding works
- Why it matters in today’s economic landscape
- How transitioning to profit-based bidding could help businesses grow instead of just getting by
What is Value-Based Bidding?
Value-based bidding allows you to weigh conversions differently according to their business impact.
By assigning values to specific actions, the bidding system can optimize for more meaningful outcomes.
This approach goes beyond simply driving conversion numbers—it helps align campaigns with long-term profitability.
What is Profit-Based Bidding?
Building on the foundation of value-based bidding (VBB), profit-based bidding (PBB) takes optimization one step further. Instead of focusing solely on the assigned value of a conversion, PBB emphasizes the actual profit margin connected to each conversion. This refined approach enables advertisers to achieve more efficient and profitable outcomes from their campaigns.
For example, consider multiple conversion actions:
- If the advertiser prefers conversion B over A, then B could be valued at $10, while A is valued at $3.
- If conversions C and D deliver equal business impact, but both hold more value than B, they can each be assigned $15.
These values help structure priorities across different types of conversions, including:
- Form submissions
- Video views
- White paper downloads
- Website interactions like chat or quote tools
Such lower-value actions, often called micro-conversions, still hold business significance, but they aren’t the ultimate goal.
With these values assigned, the bidding algorithm can weigh each action according to profitability. At auction time, value-based bidding aims to secure the most meaningful results as defined by the advertiser. When combined with a target ROAS (tROAS), it becomes a powerful method for aligning bids directly with profit objectives.
Contrast: The Traditional Maximize Conversions Bidding
Traditional Maximize conversions bidding is centered on counting conversions and aiming for the highest possible volume. While this method can generate results, it has clear limitations.
The main issue is that it treats all conversions equally, without considering the varying business value of each action. For example, in many industries, a phone call could be worth significantly more than a simple form submission because it often leads to higher-value customers or larger orders. On the other hand, form fills may result in unqualified leads, difficulties in making contact, or even ignored follow-ups. Spam filters and blocked calls only add to the problem, showing why conversion volume alone doesn’t tell the full story.
Google’s algorithm also tends to follow the path of least resistance. If forms are easier to complete, campaigns may skew heavily toward them, even if they don’t deliver long-term value. For advertisers with limited budgets, this approach can create weak data signals, limiting how effectively the bidding system can optimize.
Take the example of a local wedding or event venue. A single “booked event” may be worth $10,000, but with only a $2,000 ad budget, optimizing for that event directly may not be feasible. Instead, the advertiser could focus on smaller but meaningful actions, such as downloading a feature sheet or watching a video about the venue. These micro-conversions provide more data for Google Ads while still keeping the sales funnel active.
This is where a value-based bidding strategy becomes powerful. By assigning realistic values to each conversion type, businesses can guide Google’s algorithms toward outcomes that truly matter, even within budget limits. Instead of chasing the easiest conversions, advertisers can align bidding with the actions most likely to lead to their ultimate goal—booked events.
The Traditional Use of Value-Based Bidding
In Google Ads, value-based bidding (VBB) is a common approach, especially for ecommerce businesses. Each purchase value is sent back into the platform, allowing campaigns, ad groups, and keywords to be optimized around return on investment (ROI). This setup makes it possible to structure accounts in a way that directs budget toward products with the highest ROI potential.
Profit-Based Bidding: A Smarter Approach for Ecommerce
Profit-based bidding takes this strategy further. Instead of just sending the sale value—say, $50 for a notebook versus $10 for a ream of paper—advertisers can pass back the actual profit margin. The $10 product may carry a higher profit margin than the $50 product, making it more valuable from a profitability standpoint.
For lead generation, the same logic applies. Instead of assigning arbitrary values like $X for a “request a quote” form and $Y for a “contact us” form, advertisers can analyze historical data to see which leads drive higher profit on average. These insights allow for more accurate value assignments.
This can be set up either by passing profit margin directly in place of value or by applying multipliers to adjust the reported conversion value. Typically, this requires updates to conversion tracking in Google Ads, often using custom parameters or integrations with CRMs or ecommerce platforms.
Exception: Value-Based Bidding for Lead Generation
Unlike ecommerce, VBB is not yet the standard approach for lead generation campaigns, since assigning precise values to different lead types is more complex. A phone call may seem preferable, but form submissions might ultimately generate higher long-term profit. Here, a profit-focused mindset ensures that values reflect actual business outcomes rather than assumptions.
Some advertisers are hesitant to include “easier” conversions, such as browsing actions, fearing that it inflates numbers and creates a misleading sense of performance. This concern is valid—adding irrelevant conversions can misguide optimization.
Skilled ad managers understand the importance of optimizing toward meaningful outcomes. As industry conversations point out, indiscriminately adding conversions without weighing their true business value can put advertisers at a disadvantage. VBB, when applied thoughtfully, provides a structured way to balance multiple conversion types with profitability in mind.
The Traditional Role of Value-Based Bidding
In Google Ads, value-based bidding (VBB) is widely used, particularly within ecommerce. The purchase value of each transaction is fed back into the platform, enabling campaigns, ad groups, and keywords to be optimized based on return on investment (ROI). This approach helps advertisers allocate budgets toward products that deliver the strongest ROI.
Profit-Based Bidding: A More Advanced Approach for Ecommerce
Profit-based bidding builds on this concept by shifting focus from revenue to profit. Instead of only passing the sales value—for example, $50 for a notebook versus $10 for a paper pack—advertisers can feed in the profit margin. A lower-priced product may carry a higher margin, making it more profitable despite its smaller ticket size.
For lead generation, the same principle applies. Rather than setting arbitrary values such as $X for a “request a quote” form and $Y for a “contact us” form, advertisers can use historical data to determine which leads generate higher profit on average. This ensures more accurate value assignments and better alignment with business goals.
Implementation can involve either replacing conversion value with profit margin directly or using multipliers to adjust reported values. Often, this requires modifications in Google Ads tracking, supported by custom parameters or integrations with CRMs or ecommerce systems.
Special Case: Value-Based Bidding in Lead Generation
For lead gen advertisers, VBB is less commonly applied as the default method, since assigning precise values to different lead types is more challenging. While a phone call may appear more valuable, form submissions could produce more profitable customers in the long run. A profit-first approach ensures conversion values are tied to real business outcomes, not just preferences.
Some advertisers also avoid including “easy” conversions, such as browsing behaviors, because these can artificially inflate results and misrepresent true performance. This caution is justified, as irrelevant conversions can weaken optimization efforts.
Experienced campaign managers prioritize outcomes that matter. Industry discussions highlight that indiscriminately adding conversions without assessing their real impact often disadvantages advertisers. When applied carefully, VBB provides a disciplined framework to balance multiple conversion types while keeping profitability at the center.
FAQs on Value-Based Bidding in Google Ads
Q1. What is value-based bidding in Google Ads?
Value-based bidding (VBB) is a bidding strategy that assigns different values to conversions based on their business impact, helping Google Ads optimize campaigns for the most valuable outcomes rather than just the highest volume.
Q2. How is value-based bidding different from maximize conversions bidding?
Maximize conversions treats all conversions equally, focusing on volume. VBB, on the other hand, considers the varying values of different conversions, ensuring campaigns align with profitability goals.
Q3. Why is value-based bidding important for ecommerce businesses?
In ecommerce, not all products bring the same profit margin. VBB allows businesses to pass back purchase values (or profits) into Google Ads, ensuring ad spend is directed toward higher ROI products.
Q4. Can value-based bidding be used for lead generation campaigns?
Yes, but it is more complex. Instead of assigning random values to form fills or calls, advertisers should use historical profit data to assign accurate values that reflect true business outcomes.
Q5. What are micro-conversions in value-based bidding?
Micro-conversions are smaller actions like video views, form submissions, or whitepaper downloads. While they may not be the main goal, they still provide value and can guide prospects through the sales funnel.
Q6. How does value-based bidding improve ROI?
By prioritizing higher-value actions and adjusting bids accordingly, VBB ensures that ad spend is optimized for profitability rather than just generating more conversions.
Q7. Do I need a CRM or ecommerce integration for VBB?
For accurate profit-based VBB, yes. Integrating with a CRM or ecommerce platform allows advertisers to pass back profit data or conversion values directly into Google Ads for precise optimization.
Q8. What challenges come with implementing value-based bidding?
The main challenge is assigning accurate values to different conversions. For lead generation, this often requires analyzing historical data and considering long-term profitability.
Q9. Is value-based bidding suitable for small businesses with limited budgets?
Yes. In fact, VBB can be especially effective for smaller budgets because it ensures ad spend goes toward conversions that bring the most business value, not just the easiest ones.
