We've heard your requests for a cost-per-acquisition (CPA) bidding tool so we're excited to introduce a new AdWords feature: the Conversion Optimizer beta. Conversion Optimizer helps you meet your ROI objectives by automatically managing your bids according to a maximum CPA goal. By automating the bidding process, this feature helps you minimize your conversion costs while saving you time.Here's how Conversion Optimizer works: simply specify a maximum CPA bid and the Conversion Optimizer does the rest. It uses historical information about your campaign and automatically generates optimal CPC bids for each auction. You still pay per click, but you no longer have to manually adjust your bids to reach your CPA goals. Since the Conversion Optimizer can choose a new bid for each auction, you're provided with the additional benefit of spending money only on the search queries and sites where your ads are likely to convert. You can read more about how the Conversion Optimizer can manage your costs here.
In order to accurately predict your conversion rate and optimize your bids, the Conversion Optimizer requires that your campaign currently uses AdWords Conversion Tracking and has at least 300 conversions in the last 30 days. The Conversion Optimizer tries to keep the cost of each conversion below your CPA bid. However, if the actual conversion rate is lower than we predict, your CPA may exceed your CPA bid.
There are now two ways to bid using CPA: The Conversion Optimizer and Pay-Per-Action (PPA) beta. PPA lets you pay only when an action you define occurs (e.g. a newsletter sign-up or a purchase on your site). PPA ads are only shown in specific places on the content network -- a majority of PPA ads appear on publisher sites that use Google referrals, and a small portion of these ads also show up in AdSense for content ad units as part of a beta test. If you use the Conversion Optimizer, your ads can appear on both the search and content network. To learn more about when to use Conversion Optimizer and when to use PPA, please see this page in the AdWords Help Center.