When it comes to setting audience strategy in PPC, there are two key components:
What is the difference between targeting and Observation settings?
When you select the Targeting option in your campaigns or ad groups, you allow Google Ads know exactly who you want to reach in your advertising or where to show up.
When you use the Observation setting, the reach of your campaign or ad group is not affected.
There are times when people are confused between targeting and observation settings.
You can use targeting to specify audiences you’d like to reach or content you’d like your ads to appear on. In addition, you can use observations to get reports on certain criteria without restricting the reach of your campaign (for campaign-level targeting) or ad group.
Over on Search Engine Journal, Brooke Osmundson wrote a guide that takes us through the key differences in Targeting and Observation settings, and where they can be found in both Google Ads and Microsoft Ads.