How does Google's new Performance Max campaign work?

Learn about Google's new campaign launch Performance Max. What exactly is it? What are the benefits of this new tool in e-commerce? And how can it boost the ad performance of your ads? CEO Raphael Rohner and Lorenzo Labia, our Head of Search, discuss all this in today's interview.

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What is Performance Max?

Google's announcement that the Performance Max campaign is to be rolled out more widely initially raises many questions in the marketing world. How does this new campaign form differ from other Google advertising campaigns and how does it work at all? We have already tested the Performance Max campaigns in our online marketing agency and share our experiences with you here. Essentially, Performance Max is Google's take on an omnichannel approach. So it's a single campaign that covers all the advertising channels in the suite, including YouTube, Smart Shopping, Display and Search. This new form of campaign is very much machine learning driven. And although we can incorporate some audience signals and factors manually, the automation through Google's AI is the main focus here: we rely on Google to move the advertising budgets to where they perform best. 

What results have we seen in our tests?

Performance Max is a very interesting campaign where we have seen pretty convincing results so far. Especially when it comes to boosting ad performance - which is usually revenue or ROAS profitability. It has long been known that Google "boosts" the performance of novel tools and favours innovative campaign models over traditional ads by rewarding them with stronger ad performance. So you definitely have an advantage by being a pioneer and testing new marketing techniques early on, before the advertising market is flooded and everyone starts using these campaign forms. That's why at R17 we always test novel marketing trends as soon as they hit the market. 

How do Performance Max campaigns work?

First, set a ROAS target and additionally define some target group data. It is helpful to have a customer list to support Google's machine learning. Data from your website visitors and some other factors, such as proven keywords, will also benefit your advertising performance. Of course, you should also bring in your strongest ads and appealing ad designs. Ad creatives are very important is when it comes to machine learning. Then Google's algorithm takes over and automatically allocates your advertising budget to the individual channels as well as times of day etc.. The focus here is on the omnichannel approach. So the result is a single campaign with an overarching ROAS goal across multiple channels: YouTube, Search, Shopping, Display etc. Google then tests what works and what doesn't to attract new users and retarget existing users. The user may start on Google Search and end up on YouTube. Your potential customers are often on different channels simultaneously, so the consistency of your advertising messages across different channels is very important. 

What are the advantages of a Performance Max campaign?

We have tested Performance Max at one of our venture companies, Lichterkettenshop AG. We saw an enormous increase in performance compared to normal Smart Shopping / Google Search campaigns: We saw a performance increase of 40 to even 50%. Google announced Performance Max as a performance campaign. So if your goal is to increase your sales or ROAS, you should definitely try this new type of campaign. And even if the goal is to get ahead of the competition, the use of Performance Max is unavoidable. Because this way, your advertisements will be displayed higher in the auctions than those of your competitors who do not (yet) use this tool. In addition, Google usually gives preference to newer campaigns, i.e. if you have a Smart Shopping and a normal Shopping campaign in use at the same time, the Smart Shopping campaign will be displayed to users in the end. This will most likely also be the case with Performance Max. Therefore, it is very important to test it. 

Are there any disadvantages with the Performance Max campaign?

Similar trends can obviously already be observed everywhere, including on Facebook. For example, CBO (Campaign Budget Optimisation) is being introduced there. Although this is not on the same level as Google's Performance Max, here too the algorithm decides in which funnel phase how much is offered. The optimisation is also carried out by Facebook. 

Are Performance Max campaigns scalable?

We always try to scale slowly at first so as not to shake the system too much. Google must first have the chance to learn. If you suddenly increase the budgets too much, it probably takes 1-2 weeks to adjust them again. So we usually try to scale by 20-30%. But even with that kind of scaling, we have seen very good performance so far. So it will be interesting to see to what extent we can scale up, how high Google will set the budget for it and where it will take us. 

Do other advertising networks have a similar approach?

A possible disadvantage could be the slight cannibalisation of other campaigns. Performance Max will now take up a large part of the budget, other campaigns will therefore no longer be served to the usual extent. It remains to be seen whether Google will remedy this. While it is not a major problem, it is something we need to be aware of. Of course, it makes sense for the advertiser to have a campaign that includes all channels. But another potential disadvantage of this can be that your advertising on each channel can also compete with each other. However, we have only seen positive results in our tests so far. So in our opinion, these disadvantages are negligible compared to the benefits of the Performance Max campaign. 

What is the future outlook for the next 6 months in terms of Performance Max?

We will definitely see more consolidation where one campaign covers multiple channels. We have already seen that with Smart Shopping, where we have a little less control and it also becomes quite ad-heavy. We can imagine Performance Max replacing Smart Shopping in the future, with a complete package for e-commerce. At some point, there might even be Google Ads accounts that exclusively contain Performance Max campaigns, because these cover pretty much all ads, including retargeting. So bidding will be taken over more and more by AI and machine learning on all platforms, also in terms of time-to-day signals. We as advertisers, on the other hand, are left to focus on the creative aspect of the ads. In short, it's very image, video and ad-heavy. Of course, in the near future, you will still be able to run regular search campaigns that focus on more specific keywords. This will remain relevant for attracting new users or discovering significant keywords. But it will be interesting to see if we move towards a fully consolidated campaign that includes everything and where we can focus more on bid customisation and creative elements, which we know will also be very important in the future.