The Conversion Optimizer is an AdWords feature that uses your AdWords Conversion Tracking data to get you more conversions at a lower cost. It optimizes your placement in each ad auction to avoid unprofitable clicks and gets you as many profitable clicks as possible.
With the Conversion Optimizer, you bid using a maximum CPA, which is the most you’re willing to pay for each conversion , or a Target CPA, which is the average amount you’d like to pay for a conversion. Using historical information about your campaign, the Conversion Optimizer automatically finds the optimal equivalent cost-per-click (CPC) bid for your ad each time it’s eligible to appear. You still pay per click, but you no longer need to adjust your bids manually to reach your CPA goals and can benefit from improved ROI.
To calculate the optimal equivalent CPC bid, the Conversion Optimizer first calculates a predicted conversion rate for each auction. The Conversion Optimizer takes many factors into account, including your ad’s conversion history, the keyword’s broad match query, the user’s location, and the conversion rates of Google’s search and partner sites on the Display Network. The feature then generates an ad rank by combining your CPA bid, quality score and predicted conversion rate.