The Small Business Guide to Value‑Based Bidding in Google Ads (Stop Paying For Junk Leads)
TL;DR
Small businesses can’t afford junk leads. Value‑Based Bidding teaches Google’s AI to prioritize profitable customers by assigning values to actions. Start with static values, move to qualified leads, aim for real‑time offline conversions with real calculated values. Enhanced Conversions makes it all stitch together.
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Question: What is Value‑Based Bidding in Google Ads?
Answer: Value‑Based Bidding is a strategy that assigns dollar values to conversion actions so Google’s AI prioritizes profitable customers instead of cheap leads. For small businesses, it’s the shift from buying clicks to buying profit.
Unlike conversion based bidding, which aims to maximize the total number of conversions regardless of their value, value-based bidding focuses on maximizing the overall conversion value by considering the profitability of each conversion.
Intro: Why Small Businesses Should Care
Value based bidding probably sounds confusing. If you’re a small business owner, Google Ads can feel like a gamble. You pour money into “leads,” but half of them never close, and the algorithm keeps chasing the cheapest clicks and conversions instead of the customers who actually pay your bills.
That’s why you need to understand Value‑Based Bidding (VBB). It’s not just another tactic that I am preaching about on LinkedIn all day, it’s the difference between buying “ok” leads and buying profitable leads.
This guide is built for small businesses who want clarity, protection, and control over their paid ad spend. Value-based bidding helps align your digital advertising with your business priorities, ensuring your marketing budget is focused on high-value conversions that drive profit and growth. If you’re tired of “more leads” that don’t convert, this is how you shift Google Ads into a system that finds profitable customers.
If you want a post that compares this bid strategy to maximize conversions you might want to start here: Maximize Conversions vs. Maximize Conversion Value: Why Their Budget Pacing Behaves So Differently
Who This Is For
Therapists, MedSpas, HVAC companies, Plumbers, SaaS founders, consultants and really anyone in lead gen.
Small businesses that live and die by margins.
Owners who want Google’s AI trained to find customers who generate revenue, not just fill out forms.
Revisiting the Neighborhood: The Bounty System
We’ve already covered What Audience Signals Are (the map) and High‑Value Signals (the blue houses). Now let’s add the bounty system (aka value based bidding).
In digital advertising, there are different bidding models, traditional models like Cost-Per-Click (CPC) focus on basic outcomes, while value-based bidding strategies such as target ROAS and target CPA represent a shift toward optimizing for long-term value and better ROI.
Maximize Conversions (Old Way): Pay $5 per flyer handed out. Your worker who is handing out flyers finds the easiest houses, regardless of whether they buy. This approach focuses on getting as many conversions as possible and increasing overall conversion volume.
High Value Signals Way (Better Way): Find me the blue houses with swing-sets and a large over grown lawn because these people are more likely to buy.
Value‑Based Bidding (New Way): Pay more for houses that sign up for $500 lawn care packages, less for $50 one‑time mows. Suddenly, your worker looks for the biggest blue houses with the most overgrown lawns.
Essentially, VBB shifts Google’s focus from “Find me a person” to “Find me the money.”
The Strategic Shift
Audience Signals = Map → Where to start.
High‑Value Signals = Blue Houses → Who’s worth knocking on.
Value‑Based Bidding = Bounty System → How much each house is worth.
Google’s AI stops asking “Find me a person” and starts asking “Find me the money.”
Why Lead Gen Needs to Learn from E-commerce
E-commerce: Shopify tells Google “this sale was worth $100.” This transaction value helps Google’s AI learn to find more $100 shoppers.
Lead Gen: Offline sales weeks later. Most small businesses just track “Leads.”
Problem: Not all leads are equal. Assigning the same conversion value or the same value to every lead trains Google to find the cheapest, lowest‑quality leads and undermines your value-based bidding strategies.
Solution: Rank your leads with value.
Understanding Customer Value and Lifetime
If you want your value based bidding strategy to truly work, you need to understand what a customer is actually worth to your business—not just today, but over their entire relationship with you. This is where customer lifetime value (CLV) comes in. CLV is the total revenue you can expect from a customer throughout their time with your business, factoring in repeat purchases, upsells, and long-term loyalty.
Why does this matter for Google Ads? Because not all conversions are created equal. Some customers might buy once and disappear, while others become loyal fans who drive your profit margins for years. By focusing your ad spend on high value customers, you’re not just chasing more conversions—you’re chasing more valuable conversions that actually move the needle for your business objectives.
Here’s how you can put this into action:
Assign values to conversion actions: Use your historical data to figure out which actions lead to the highest customer value. Maybe a demo request is worth more than a newsletter signup, or a phone call from a certain customer segment leads to a higher average order value. Assign different values to these actions in Google Ads so the algorithm knows what matters most.
Leverage first party data: Your CRM and sales data are gold mines. Feed this information into Google Ads to help machine learning models identify patterns in customer behavior and spot high value customers. The more accurate your data, the smarter your bidding strategies become.
Implement robust conversion tracking: Make sure you’re capturing every step that leads to revenue, not just the initial lead. This means tracking repeat purchases, upsells, and any offline conversion data that reflects true customer value.
Adjust bids based on value: With value based bidding, you’re not just setting a target CPA and hoping for the best. Instead, you’re telling Google to optimize for maximum conversion value, using smart bidding strategies like target ROAS. This ensures your advertising budget is spent on the conversions that deliver the most value over the customer lifetime.
Traditional bidding strategies often treat every conversion the same, but value based bidding focuses on what really matters: profit, not just volume. By understanding and assigning different values to your conversion actions, you can make every dollar of ad spend work harder for your business.
In short, when you implement value based bidding and focus on customer lifetime value, you’re building a system that finds and nurtures high value customers. This approach not only maximizes your conversion value, but also aligns your Google Ads campaigns with your long-term business goals—helping you grow smarter, not just bigger.
The 3 Levels of Value‑Based Bidding
Value‑Based Bidding (VBB) isn’t a single switch that you turn off or on. It’s a spectrum. Advertisers move through three levels of sophistication, each one teaching Google’s AI more about which conversions actually drive profit.
To enable value based bidding in Google Ads, you need to set up conversion tracking with assigned values and activate a bidding strategy that optimizes for conversion value, allowing Google’s AI to use your data to maximize profit instead of just conversion volume. This is how value based bidding works: it leverages actual conversion value data—such as profit margins or customer segment value—to tailor bids and focus on the most valuable outcomes, not just the highest number of conversions.
Level 1: Static “Estimate” Values (Proxy Method)
Think of this as the training wheels stage. You assign fixed proxy values to different conversion actions:
Assign fixed values: White Paper = $5, Form Fill = $50, Phone Call = $100.
Pro: Gives Google a hierarchy.
Con: Blunt instrument this treats $10k call same as $0 call.
Best for: Small businesses new to value based bidding who are starting out, and need a quick way to signal that some actions matter more than others.
Level 2: Qualified Lead and Customer Lifetime Value (Deep Funnel Method)
Here you move beyond proxies and start assigning values based on deal size × close rate (conversion rate), incorporating the concept of expected value to estimate the long-term revenue a qualified lead can generate. For example: A qualified lead might be worth $200 because you know 1 in 5 closes at $1,000, so the expected value per lad is $200.
Value milestones: Qualified lead worth $200 (conversion rate, reflecting the expected value).
Pro: Filters junk leads.
Con: Time lag slows AI learning.
Best for: B2B advertisers or service businesses with longer sales cycles, where lead quality varies dramatically.
Level 3: Real‑Time Offline Conversions (Ground Truth)
This is the gold standard. You connect your CRM or POS system directly to Google Ads, feeding back the actual revenue from each customer: using offline conversion uploads and leveraging Google data for campaign optimization.
Feed actual revenue from CRM back into Google Ads with accurate data to ensure Google's machine learning can optimize value-based bidding strategies effectively.
Pro: Gold Standard—this is exact profit data, enables tROAS bidding.
Con: Technical setup + volume required.
Best for: Businesses ready to scale profitably, who want Google’s AI fully aligned with their bottom line.
The Small Business Reality Check: Pros & Cons
Think of this as your decision filter. If you’re running a small business, here’s what Value‑Based Bidding (VBB) really means for you.
Value-based bidding can help you focus your ad spend on the conversions that matter most, but it’s crucial to spend time evaluating performance throughout the process. This ensures you’re not just trusting automation blindly, but actively assessing whether your campaigns are meeting your business goals.
Pros:
Lets you prioritize high-value conversions, not just volume.
Automated strategies handle adjusting bids in real time, saving you manual effort.
Uses data to optimize bids for long-term profitability and customer lifetime value.
Cons:
Requires accurate conversion tracking and reliable data.
Can take time to gather enough data for the system to optimize bids effectively.
If you don’t regularly evaluate performance, you risk missing out on optimization opportunities or letting inefficiencies persist.
Upside
Bidding for profit, not cheap leads. Instead of paying for every click or form fill, you’re telling Google to chase the customers who actually generate revenue.Google aligned with your bottom line.
Budget protection. For once, the algorithm wants the same thing you do: profit, not just traffic.
Clear ROI visibility. With values assigned to conversions, you can see which campaigns are driving profit directly inside your Google Ads dashboard.
Trade‑Offs
AI needs enough value data. Google’s machine learning can’t optimize without a baseline. If you want to dig deeper, read my post “100 Clicks or More for Decision Making” where I break down why both humans and AI need data volume before making smart choices.
Setup requires CRM/offline tracking. This isn’t just a thank‑you page tag. To get real value data, you’ll need to connect your CRM, POS, or offline conversion tracking.
Long sales cycles and conversion delays delay reporting. If your business closes deals over weeks or months, Google’s AI has to wait for the revenue feedback, which slows down optimization. For small businesses, the pros outweigh the cons.
Bottom Line for Small Businesses
Yes, there are hurdles — setup, data, and patience. But the pros outweigh the cons. Value‑Based Bidding protects your budget, aligns Google’s automation with your business goals, and gives you visibility into real ROI. For small businesses fighting to survive in competitive markets, this shift isn’t optional — it’s the path to sustainable growth.Why “Enhanced Conversions” Is the Missing Link
With privacy changes, tracking click‑to‑sale is harder. Enhanced Conversions uses hashed first‑party data (email, phone) to stitch the journey together.
Without Enhanced Conversions, VBB is flying partially blind. With it, your signals are accurate and privacy‑safe.
Your Roadmap to Scaling
Here’s the progression you now own:
Audience Signals → The map.
High‑Value Signals → The blue houses.
Value‑Based Bidding → The bounty system.
Value based bidding helps you get more value from your ad spend as you scale by optimizing for the true value of each conversion, not just the number of conversions. This strategy allows you to maximize the value derived from every conversion, ensuring your campaigns focus on profitable customer acquisition as you grow.
The transition from buying clicks (cheap customers) to buying profit is the single biggest leap a small business can make. Stop asking Google for more leads. Start asking Google for more profitable customers.
For more reading, I cover this concept in my post: Stop Chasing CTR as well.
FAQ About Value Based Bidding
What is Value‑Based Bidding in Google Ads? VBB assigns values to conversions so Google optimizes for revenue, not just leads.
Why should small businesses use VBB? Because treating all leads equally wastes budget on low‑quality prospects.
What are the levels of VBB? Static proxy values, qualified lead values, and real‑time offline conversions.
Is VBB only for ecommerce? No. Lead gen businesses can implement it with CRM data and Enhanced Conversions.
What’s the biggest benefit of VBB? It protects your budget and scales profit by aligning Google’s AI with your revenue goals.
How does setting a target cost work with value-based bidding? Setting a target cost, such as target CPA, allows you to control how much you’re willing to pay for each conversion. In value-based bidding, you can compare target cost strategies with target ROAS to decide which aligns best with your business goals and long-term value.
How do I adjust conversion values in Google Ads? You can adjust conversion values by using Value Rules at the account, campaign, or ad group level. This lets you customize conversion valuations based on business insights, customer segments, or additional data sources, ensuring your bidding reflects true business value.
Why is collecting the right data important for value-based bidding? Collecting the right data, especially accurate conversion value data, is essential for value-based bidding to work effectively. The right data enables Google Ads to optimize your campaigns for the highest value actions and improve your overall ad performance.
