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Similar Audiences in Google are based on your remarketing audiences.
Google Ads will scan through your remarketing list and using machine learning it will find or generate new audiences who have shown a similar search or browsing behavior to your existing list. Once this similar audience visits your site they will be excluded from the similar audience and included on the remarketing list instead.
Be careful when using similar audiences! If only 2% of your website visitors convert, the other 98% might not be good candidates for a similar audience. Wherever possible, only use similar audiences based on users who transacted, added to cart, subscribed or did some other converting activity where they indicated interest in your offer. You definitely don’t want an audience similar to people who bounced.
If you don’t have conversion remarketing audiences available (PS. we offer this as a service), you can create a remarketing audience of users who did not bounce, and this will make a much better similar audience compared to “similar to all users”.
This tip and many others are found at https://www.petramanos.com/category/tips/