01The formula most operators get wrong
A bid cap that is too low starves the algorithm of conversion signal. A bid cap that is too high destroys margin. The right cap is a function of your gross margin, your CAC ceiling, your average order value, and your expected attribution lag.
The formula: Max CPA = (AOV × Gross Margin) / CAC Multiplier. Where CAC Multiplier is typically 1.0 for single-purchase products and 0.4–0.6 for subscription products where LTV is the real denominator.
Asset groups with different AOVs need different bid caps. Applying one cap account-wide systematically overpays for low-AOV groups and underpays for high-AOV groups.
Ruslan co-founded Tegra in 2017. Runs the Google Ads practice — feed, PMax, search, attribution. Writes weekly about the parts of paid search operators are afraid to touch.