Google’s Demand Gen Drop: Smarter Bidding, AI Creativity & YouTube Power Plays

Google’s Demand Gen campaigns are built to connect discovery, creativity, and performance. 

The latest update, also known as the Demand Gen Drop, features a suite of powerful updates designed to sharpen performance. These include bidding, creative production, and audience acquisition, particularly across YouTube and mobile apps. Together, these upgrades are designed to help marketers win attention more efficiently while driving meaningful results.

According to Google’s internal data, these updates include enhancements that target acquisition efficiency, cross-platform bidding consistency, deep linking, AI-powered creative, and product-feed‐driven conversion lifts. 

Let’s dive deeper into each of the major updates. Here’s what has changed, why it matters, and how you can use them in your campaigns.

New Customer Acquisition Goals

One of the headline features in this month’s update is a refined focus on acquiring new customers. Google has introduced a mode called New Customer Only Mode. It is specifically tailored to advertisers who aim to expand their customer base rather than rely on repeat business.

What The Data Shows

• Advertisers improved their new customer ratio by an average of 11.5%. 
• The acquisition cost for new customers was reduced by around 3%. 

These figures are based on Google’s internal studies (Global, March–May 2025). 

Why This Matters

• Expanding the customer base is often more costly and unpredictable than re-engaging existing customers. These tools help tilt that balance favourably.
• As the channels are saturated and competition for existing customers is increasing, focusing on new customer acquisition becomes a strategic lever.
• It gives marketers a clearer signal. If your goal is growth (new customers) rather than just retention, you now have a bidding/mode optimisation path.

How To Apply It

• Look for “New Customer Only” or similar goal-mode toggles in your Demand Gen campaign settings, and enable them.
• Monitor metrics such as new customer count, cost per new customer, and compare them with your baseline acquisition cost for mixed audiences.
• Feed high-quality conversion data (e.g., flagged as “first purchase” or “first engagement”) so the system can identify “new vs returning” behaviour.
• Align creative and offer messaging accordingly, such as new-customer focused promos, first-time discount, and onboarding incentives.

Deep Linking via Web to App Connect (iOS)

Mobile-first brands can now make use of Web to App Connect for iOS, a deep-linking solution that takes users from an ad directly into your mobile app.

What It Involves

• Previously, advertisers may have had a web landing page, then tried to “pull” users into the app; now the path can be smoother: ad → web → app.
• The user experience becomes seamless. Clicking an ad takes the user into your app (if installed) or prompts install/first‐launch.
• Google says that once implemented, users move smoothly from ads to the mobile app. 

Why It Matters

• App-based conversions (in‐app purchases, registrations) are often higher value or higher margin in mobile-first strategies. 
• Reduces friction. Instead of making users land on the web and then manually navigate to the app, the journey is streamlined. 
• For iOS, especially (which has historically been more locked down in terms of app attribution/tracking), this deep-linking enhancement is timely.

How To Apply It

• Ensure you’ve set up Web to App Connect (check your developer SDK, URL scheme & app install flows).
• Use app-focused CTAs, like “Open in our app” or “Shop faster in-app.”
• Track in-app events, such as sign-ups, purchases, or trials, to measure full-funnel impact.
• Select the app as your conversion destination (in addition to or instead of web).
• Tailor creative. Highlight “open our app for faster shopping,” or “install our app for exclusive offers.” 
• Monitor post-install events (first-purchase and onboarding completion) to evaluate the effectiveness of the deep-link path.
• Compare the performance of web-only vs web-to-app deep link using your analytics to validate improved conversion metrics.

Target CPC Bidding Across Platforms

Another important capability introduced is Target CPC (cost-per-click) bidding for Demand Gen campaigns, allowing advertisers to optimise and compare performance across ad platforms with consistent settings. 

What’s New

• Instead of only optimising for clicks or conversions via Smart Bidding, you can now set a target CPC. This gives more predictability around cost of traffic. 
• The same bidding settings can now be applied across ad platforms within Demand Gen, making cross-platform performance comparisons more coherent. 

Why This Matters

• For upper-funnel campaigns (where clicks, visits, and engagement matter), it provides predictable costs and tighter budget control.
• When you’re running multiple platforms (e.g., YouTube, Discover, Gmail), this helps standardise bidding strategy, making evaluation simpler.
• Helpful to scale traffic, test new creatives or audiences, and keep costs under control while learning performance.

How To Apply It

• Use Target CPC when your primary goal is site traffic, engagement, or awareness.
• Define your target CPC based on your historical performance: what you’re willing to pay per click (e.g., visit → signup → purchase).
• Monitor metrics (bounce rate, pages per session, and lead quality) to ensure that cheaper clicks aren’t simply low-quality.
• Once you have stable performance at the target CPC, you can fine-tune. (Lower CPC for new audiences and higher for remarketing/advisory).
• Compare performance across platforms (YouTube vs Discover, etc) using the same bidding logic to identify which placements yield better ROI.

AI-Generated Video Creative for YouTube

Creativity at scale is a major focus of this update. Advertisers can now use AI to generate videos that optimise for viewer experience and increase reach on YouTube. 

What The Feature Brings

• AI tools can help create video assets optimised for viewer behaviour.
• The aim is to reduce production cost/time while enabling more variations.
• With YouTube being a major inventory for Demand Gen campaigns, this creative boost is well-aligned with performance goals.

Why This Matters

• Video production is expensive and time-consuming. AI generation lowers the barrier.
• More creative variations mean better ability to test what creative resonates, adapt format (vertical, square, and horizontal), and iterate.
• Modern viewers have short attention spans. Optimised video can deliver a message quickly and drive action.
• Creative becomes a performance lever rather than just a cost centre.

How To Apply It

• Audit your existing video assets: Identify long-form videos you can repurpose or shorten, or storyboard key messages ideally suited for shorter formats.
• Use Google’s AI‐video generation (or partner tools) to create multiple versions: 6s intro, 15s, 30s, vertical/9:16 formats, thumbnail changes, etc.
• Test new AI‐generated creatives against your standard video to evaluate uplift in reach, engagement, and conversion.
• Use viewer behaviour metrics (view-through rate, YouTube “watch until end,” click-through for overlay/call-to-action) to determine best performing variants.
• Keep creative fresh with easier generation, you can rotate and test more often.  Avoid creative fatigue.

Product Feeds as Virtual Storefronts + tROAS Goals

Finally, for advertisers with product catalogues, a key update is the ability to leverage product feeds as virtual storefronts within Demand Gen campaigns, especially when paired with tROAS (target Return On Ad Spend) goals. 

According to Google, campaigns doing this typically see a 20% increase in conversions. 

What This Means

• Rather than static, your product feed (via Google Merchant Center or equivalent) becomes integrated into the Demand Gen ad experience.
• When combined with tROAS bidding, the system can optimise for conversions, rather than just clicks or generic volume.
• This turns your Demand Gen campaign into a quasi-retail storefront in the ad space.

Why It Matters

• For e-commerce or retail brands, this reduces the gap between ad exposure and purchase. The product is directly surfaced in the ad.
• tROAS-based bidding aligns bidding behaviour with business value (not just volume), which means better ROI optimisation.
• A 20% conversion uplift is meaningful; given the cost pressures in digital advertising, any efficiency gain matters.

How To Apply It

• Make sure your product feed is up-to-date, clean, and linked correctly via Merchant Center (or appropriate Google Ads feed integration).
• In your Demand Gen campaign settings, select product-feed display as a creative asset or ad variation.
• Set up tROAS bidding: Define what return on ad spend you expect from each conversion and let the system optimise toward that.
• Monitor feed performance: Which products (categories, price-points) perform best in the Demand Gen context? Use this insight to refine your feed (e.g., highlight high-margin items).
• Keep a test vs control: Use similar campaigns without product-feed assets to determine the incremental lift from the feed-enabled variation.

Implementation Checklist & Best Practices

To make the most of this update, here is a practical checklist and some best practices to follow:

Checklist

• Review your campaign goals: Are you optimising for new customers, app installs, conversions, or traffic?
• Enable New Customer Only Mode when you need fresh customer acquisition.
• For any mobile-app business, set up or validate Web to App Connect deep linking for iOS.
• In relevant Demand Gen campaigns, enable Target CPC bidding (where traffic/engagement is the goal).
• Audit your video creative assets and generate AI-optimised variations (shorter formats and multiple aspect ratios).
• For commerce-oriented advertisers: Ensure your product feed is active in Merchant Center, then integrate it with Demand Gen and set up tROAS bidding.
• Define and implement measurement structure: New customer purchase event, in-app conversion, post-install revenue, feed-driven conversions, etc.
• Monitor performance regularly: CPC, new customer cost, conversion lift, view-through, and watch time metrics on YouTube, and product feed conversion rate.
• Experiment and iterate: Use A/B testing for creative variations, feed vs non-feed, CPC targets vs default smart bidding.

Best Practices

• Segment your audience and bidding strategy: New customers vs existing — set different bids, messaging, and creative approaches.
• Use compelling creative upfront: Even though AI tools help, good inputs (clear messaging, strong value proposition, brand identity) make all the difference.
• Don’t sacrifice quality for cost: Lower CPC or cheaper clicks don’t always mean better ROI; ensure engagement quality remains high.
• Feed hygiene matters: For product-feed strategies, ensure clean data, accurate pricing, availability, high-quality images — errors here degrade performance.
• Use cross-platform reporting: Because bidding and creative now span YouTube, Discover, Gmail, ensure your analytics track each channel and placement separately to spot where you’re winning or underperforming.
• Keep creative fresh: As ad fatigue sets in quicker, especially with video, rotating and generating new variants is key.
• Align with your business funnel: Ensure the campaign type and mode match where users are in the journey (awareness vs consideration vs conversion). 

The New-Customer mode or Target CPC may be best for the upper funnel, while tROAS may serve the lower funnel.

What This Drop Means for Marketers

The Demand Gen Drop isn’t just about isolated features. It signals some broader strategic shifts for advertisers to consider.

Focus on new-customer growth

• Tools like New Customer Only Mode emphasise reaching new audiences rather than retargeting the same users.
• Google is signalling that growth (not just efficiency) is increasingly important.

Creativity + automation synergy

• AI-generated videos show that creative and machine learning can complement each other. 
• This frees up marketer time to focus on strategy, concept, brand voice, and testing rather than purely asset creation.

Cross-platform fluency

• Unified bidding strategies like Target CPC allow advertisers to focus more on strategy and less on manual adjustments.
• Advertisers will increasingly need to think less “YouTube vs Display” and more “omnichannel visual Demand Gen.”

Conversion value becomes central

• The use of tROAS with product feeds emphasises value over volume. 
• As costs rise and competition intensifies, being able to bid toward what the business values rather than simple clicks becomes a competitive advantage.

Measurement and data foundation matter

• Rely on good conversion tracking, clean data (first-party especially), and measurement setups. 
• These help distinguish new vs returning customers, web vs app conversions, product feed performance, etc.

Without this foundation, high-level tools will underperform.

Challenges & Considerations

No tool is without caveats. Here are some potential pitfalls and things to watch out for:

• Data latency or signal quality: If you don’t have reliable conversion data (especially new-customer vs returning, or in-app events), the machine-learning models behind these modes will struggle.‍
• Creative fatigue or irrelevance: Just because you can quickly generate AI videos doesn’t guarantee they’ll resonate; you still need human oversight and iteration.‍
• Platform-specific performance variance: Even though tools allow unified settings, different placements (YouTube, Discover, Gmail) may behave very differently; assuming uniform behaviour is risky.‍
• Product feed complexity: Feed errors, out-of-stock items, and mismatched pricing can erode performance and also trigger ad disapproval.‍
• Over-emphasis on cost-cutting: Lower CPC or acquisition cost are good metrics, but if quality or lifetime value falls, you may end up worse off.‍
• Privacy/measurement shifts: As tracking evolves (especially on iOS or web with stricter privacy), ensure you’re adapting measurement to maintain visibility. See also broader Google Ads policy updates. 

Conclusion

The Demand Gen Drop brings a compelling set of enhancements for advertisers looking to grow their brand, drive new customer acquisition, and optimise performance across YouTube and other Google surfaces. From strategic bidding (Target CPC) to smoother app experiences (deep linking), from AI-driven video creation to product-feed-driven storefront campaigns, the toolset is richer than ever.

To truly get benefits from these updates, advertisers will need to combine strong measurement foundations, creative agility, strategic bidding, and cross‐platform fluency. Those who move quickly and test thoughtfully stand to benefit from improved acquisition efficiency, conversion lifts, and creative leverage.

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