By Editorial TeamKey Takeaways
- To set up a Demand Gen campaign, pick a “Sales” or “Leads” objective inside the 2026 Google Ads interface, then just select “Demand Gen” as the campaign type.
- You turn on Audience Expansion Optimization (AEO) by working through to “Audiences” in your campaign settings, flipping the “Optimized targeting” switch on, and starting with a low expansion percentage.
- Check your KPIs, like conversion rate, cost per acquisition (CPA), and ROAS, in the Google Ads reports, looking for clear improvements over 3-4 weeks to see if AEO is working.
- Feed the machine good inputs: review and update your seed audiences, creative, and bidding at least every couple of weeks for AEO to perform at its best.
Getting a real return on investment (ROI) from digital ads comes down to two things: sharp targeting and never-ending optimization. For marketers trying to drum up new interest, figuring out Google Demand Gen ROI, especially when you add Audience Expansion Optimization (AEO) to the mix, can lead to big wins. We’ve seen businesses get a 9.5% bump in conversion efficiency just by getting this part right.
Step 1: Setting Up Your Google Demand Gen Campaign
The whole game with demand gen in Google Ads is won or lost at setup. It’s more than picking a goal. You’re telling the platform exactly what you want it to do for your business before you spend a single dollar.
1.1 Working through to Campaign Creation
In the 2026 Google Ads interface, once you’re logged in, find the “Campaigns” section on the left-hand menu. Click it, then hit that big blue “+ New campaign” button you’ll see at the top. This gets the whole process started.
1.2 Choosing Your Campaign Objective
Google will ask what you’re trying to achieve. For demand gen, you’re usually trying to fill the top of your funnel, so you’ll want to select either “Sales” or “Leads“. While “Sales” is for direct purchases, “Leads” is typically a better fit here, since it’s focused on getting contact info or starting a conversation. Once you’ve picked one, hit “Continue.”
1.3 Selecting the Demand Gen Campaign Type
On the next screen, you’ll pick a campaign type. You’re looking for “Demand Gen” in the list with Search, Display, Video, and Performance Max. Choose “Demand Gen.” This type is built specifically to get your ads on YouTube, Gmail, and Discover feeds, where it can use Google’s data to find people who might actually be interested in your brand. You’ll then have to choose your conversion goals, make sure they match the objective you just selected, like website leads or phone calls.
Pro Tip: Don’t even think about launching until your conversion tracking is perfect. Seriously. I’ve seen more campaigns burn money because of sloppy tracking than any other reason. Google’s algorithms, AEO included, are flying blind without accurate conversion data.
Step 2: Implementing Audience Expansion Optimization (AEO)
AEO is how you really start to scale your demand gen work. It’s a feature that lets Google’s AI find new, converting customers for you, reaching beyond the audiences you’ve manually picked out.
2.1 Accessing Audience Settings
After you’ve created your Demand Gen campaign, click into its settings. In the left menu, you’ll see “Audiences.” Click that. This is where you can get a summary of your current audience targeting and make changes.
2.2 Enabling Optimized Targeting
Inside the “Audiences” area, you’re looking for the “Optimized targeting” switch, that’s what Google calls AEO in this context. Turn it “On.” Once enabled, Google Ads starts looking for people who behave like your best customers, even if they don’t perfectly match the demographics or interests you’ve defined. It’s not surprising that a recent IAB report noted that this kind of AI-driven expansion is beating static targeting on reach and engagement.
2.3 Configuring Expansion Parameters
After you flip the switch, you might get options to control how aggressive the expansion is. My advice? Always start conservatively. I’m talking a 5% to 10% expansion beyond your core audience. This lets the system learn without going completely off the rails and wasting your budget. You can always dial it up later as you see performance improve. Give the algorithm a leash, but make sure it has enough room to explore.
Common Mistake: People switch on AEO and expect miracles without giving it a strong “seed” audience to begin with. AEO isn’t magic. It expands on the data you give it. If you start with garbage audiences (like poorly performing remarketing lists or irrelevant custom segments), you’re just going to get more garbage. Garbage in, garbage out.
Step 3: Crafting Compelling Creative Assets
Your sophisticated targeting setup means nothing if your ads are boring or irrelevant. Demand Gen campaigns are visual by nature since they show up across the YouTube, Gmail, and Discover feeds.
3.1 Developing Diverse Ad Formats
For Demand Gen, you have to feed the system a variety of creative. This means high-quality images (get your aspect ratios right: 1.91:1, 1:1, and 4:5 are key), short videos that can grab attention in under 15 seconds, and good, punchy ad copy. I always recommend creating multiple variations for everything, a few different headlines, a couple of descriptions, and several image options, so the system has plenty to test and learn from.
3.2 A/B Testing Creative Elements
Head over to “Ads & extensions” in your Demand Gen campaign to create these variations. Google’s algorithm will automatically start shifting budget toward the combinations that work best. Your job is to check the “Asset report” regularly to see which headlines, descriptions, images, and videos are actually driving conversions. Don’t get attached to your creative. Pause the losers and replace them with new tests based on what you’re seeing in the data.
Editorial Aside: Let’s be real. Google’s creative “AI” isn’t thinking for you. It’s just a powerful testing machine. Its output is only as good as the quality and variety of the assets you put in. If you feed it mediocre ads, you’ll get mediocre results. Spend the money on good visual content.
Step 4: Monitoring and Optimizing Performance
Getting a campaign live is just the starting line. The real work is in the continuous monitoring and tweaking required to actually see that 9.5% conversion efficiency boost and make it stick.
4.1 Key Performance Indicators (KPIs) to Track
In your Google Ads reports, you need to zero in on the metrics that actually show if your demand gen efforts are working. For me, these are the big ones:
- Conversion Rate: The percentage of people who click and then do the thing you want (like fill out a form).
- Cost Per Acquisition (CPA): How much you’re paying, on average, for each one of those conversions.
- Return on Ad Spend (ROAS): If you can tie revenue back to your ads, this tells you how many dollars you’re making for every dollar you spend.
- Click-Through Rate (CTR): While it’s not a conversion metric, a healthy CTR is a good sign that your ads are actually resonating with people.
You can find all this by going to “Reports” in the main menu, then “Predefined reports (Dimensions)“, or by building your own custom report with just these columns.
4.2 Iterative Adjustments to AEO
Give the campaign 3-4 weeks to collect data. Don’t touch it too much before then. If you come back and see your conversion rate and CPA are heading in the right direction, you’ve earned the right to increase your audience expansion percentage a bit. But if performance is flat or getting worse? It’s time to go back and check your seed audiences and creative. The problem is almost always in the inputs.
4.3 Bid Strategy Refinements
Demand Gen campaigns run well on automated bidding like “Maximize conversions” or “Target CPA.” These machine learning strategies optimize bids in real-time, but they’re useless without enough conversion data to learn from. If you’re on “Maximize conversions,” make sure the budget is big enough for the system to explore. If you’re using “Target CPA,” set a realistic number based on what a lead is actually worth to your business. You can find these options under the “Settings” and “Bidding” section of your campaign.
I’ve run dozens of these campaigns, and the ones that kill it are always the ones where the team treats optimization like an ongoing conversation with the algorithm, not a one-time setup. It’s a cycle of reviewing data, forming a hypothesis, and making a change to see what happens.
Step 5: Using Audience Insights for Future Campaigns
Your Demand Gen campaigns, especially with AEO running, produce a ton of valuable audience data. This data is one of the most valuable outputs of the campaign, so don’t just let it sit there.
5.1 Analyzing Audience Segments
Inside the “Audiences” section of your campaign, look for “Audience insights.” This report is a goldmine. It breaks down the demographics, interests, and behaviors of the people who are actually converting from your ads. Look closely at the high-performing “In-market segments” and “Affinity categories.” These insights should absolutely inform your next Demand Gen campaign and can even ripple out to your broader marketing strategy, influencing everything from the content you create to product decisions.
5.2 Refining Seed Audiences
Use what you learn here to build better seed audiences next time. For example, if the Audience Insights report shows a strong conversion rate from users in the “Small Business Software” in-market segment, you should build a new custom segment or target that segment directly and more aggressively in your next campaign. This is the loop that gets results. Learn, refine, and repeat.
Following these steps, from a clean setup to constant, data-backed optimization, is how you can make Google Demand Gen with AEO a serious engine for boosting your conversion efficiency and your overall demand gen ROI.
What’s the main point of using Google Demand Gen campaigns?
The main benefit is that Demand Gen campaigns get your ads in front of people on YouTube, Gmail, and Discover, using Google’s AI to find new and qualified prospects who are earlier in their buying process. It’s all about creating initial demand.
How does AEO (Optimized targeting) actually work in Demand Gen?
AEO, which Google calls “Optimized targeting,” uses machine learning to find new people who are likely to convert. It analyzes your existing seed audiences and their online behavior to find similar users, which scales your campaign’s reach beyond your manually selected segments.
What kind of creative do I absolutely need for a Demand Gen campaign?
You absolutely need a mix of assets: high-quality images in different aspect ratios (like 1.91:1, 1:1, 4:5), short videos (under 15 seconds is a good target), and a few different versions of your headlines and descriptions so Google’s system can A/B test them for you.
How often do I need to check and tweak my Demand Gen campaigns with AEO?
You should keep an eye on your campaigns weekly, but hold off on making big changes. Wait until you have 3-4 weeks of solid data before you start making major adjustments to things like your seed audiences or bidding, as the AI needs that time to learn.
Does AEO mean I don’t have to do manual audience targeting anymore?
No, AEO is a supplement, not a replacement. It works by expanding on the high-quality seed audiences you provide it. The success of AEO is completely dependent on how relevant and well-performing your initial manual audience targeting is.
