Paid Search Budget Management

Digital Marketing - Study Notes:

Managing your advertising budget

Managing your advertising budget in Google Ads should be the first major consideration for delivering on your business objectives.

Since pay-per-click or PPC advertising is a conversion channel, try to think of your budget in terms of commercial investment, rather than just an ad spend. For example, when you measure your ecommerce metrics, maybe you see in your reports that something like $100 of PPC media spend = $1200 worth of ecommerce revenue. Therefore, $1,000 invested in Google Ads should yield you $12,000 in revenue. Think of it like an investment with an expected commercial outcome based on the metrics you typically see from your PPC campaigns. If you think of it in commercial terms relating to your business objectives, you'll find it easier to reduce inefficiencies in your account when managing PPC, as inefficiencies in your PPC spend will limit your investment in terms of commercial returns.

Budget management best practices

There are a few key things to remember when managing a paid search campaign budget.

Monitor PPC spend

Knowing how much to budget for PPC spend is linked to how much you believe you can make from that spend. You can determine your media budget by forecasting from conversion tracking, historical ROI, ecommerce metrics, or lead gen metrics.

It is essential that you don't go over your allowable spend in any given week, month, or year unless, of course, you have permission to do so. 

Tracking your spend levels in a spreadsheet, and keeping an eye on the spend to date versus the monthly or campaign total, allows you to adjust what’s known as your campaign run rates or pacing. To successfully manage a PPC budget, it’s vital you know how much you are spending each day and if you’re on track to spend at the expected level for the period.

Use Google Ads features

Take advantage of the budget management features offered in Google Ads like:

• Daily Spend, which allows you to controlexactlyhow much you spend on individual campaign each day, making it easier to stick to the amount you budgeted for.
• Maximum Cost Per Click, or Max CPC, a feature that sets themaximumprice you are willing to pay for a click, where the sum of all clicks should add up to your daily budget for that campaign. When your daily budget is spent, you won’t get any more clicks until the budget refreshes the next day. Bear in mind that Google might spend more than your daily budget on busy days but it will spend less on lower traffic days so it evens out on average over 30 days. Bids can be set manually, though this is not recommended. Alternatively, it can be handled using Google's AI powered Smart bidding strategies, which is the recommended approach because AI will drive better results.
• Show your ads only at certain times of the day and days of the week to focus on high impact hours and days. This allows you to controlwhenyour ad is shown and ensures your budget is being spent when it should have the largest impact. You can set this up using manual ad schedules or allow the AI within the Smart bidding strategies to automatically test and learn when the best times to show your ads to deliver on your objectives. If you are using Smart bidding, it will ignore any manual ad schedule you have set.

Managing daily spend

Let’s now look in a little more detail at managing your daily spend. Each PPC campaign has a daily spend or budget, which is specified by you, the advertiser. By structuring your account correctly, you can manage your daily spending by investing at appropriate levels in your best-performing campaigns, and this of course ultimately translates into your weekly and monthly spend.

Keywords and ad groups

The way that you manage your keywords and ad groups will also have an impact. Putting keywords and ad groups with similar search volumes or conversion levels into one campaign, for example, means that you can set higher daily budgets for high-conversion keywords. And conversely, you can set lower budgets for low-conversions keywords in other campaigns. This is key to managing your media budget investment as you are spending more on the campaigns that deliver the best results.

Regardless of the AI-powered backend, if you put low-conversion keywords in the same campaign as high-conversion keywords, both high- and low-conversion keywords will spend all of the available budget. This means that there is less budget available for higher-conversion searchers and can result in lower ROI. The same applies to structuring campaigns by high- and low-volume keywords. The campaign daily budget is the starting point for how we invest and your campaign structure will determine how you invest your available media spend. This is why it's important to know how to structure your campaign by search volume and conversion rate to get the best out of your daily budget and the native AI tools.

Moreover, when you structure the campaigns for efficient daily spend management, you can apply different bid strategies to the keywords and ad groups in each campaign. This allows you to drive performance and optimize efficiencies. Bid types are discussed later in the course, but for now it’s essential to understand how best to manage how much you are spending. Bids, when we come to them, will determine how you intend to spend your campaign budgets at an individual keyword or ad group level. The daily budget of each campaign you create is the most important factor in relation to how much you will be paying Google to advertise on a set of keywords so it’s important to cap it at a level that allows you to perform while not exceeding your allowable weekly or monthly budget.

Budget tracker

To ensure you’re keeping your daily spending under control, it’s best practice to use a budget tracker. This is a document that measures how much you have spent against your monthly, weekly, and daily budget. By tracking how much you've spent so far versus the total allowable budget, you can see if you are spending too much or too little, and this essential information to ensure your overall spending pace is on track!

Forecasting

At the outset, when you’re planning your PPC campaign, you’ll need to estimate the likely required budget. You can estimate how much a campaign will spend by looking at the available impressions or monthly search volume and clickthrough rates you typically get to estimate the number of clicks you’re likely to generate from your keywords. And if you multiply your estimated clicks by the CPC, or the cost per click, you usually get for these types of keywords, you’ll be able to forecast an overall campaign cost.

Your CPCs can be manually set at a keyword level – that is, on specific bids for individual keywords set manually by you – or you can set them automatically using Google’s automated bid strategies. Alternatively, CPCs can be manually set at the ad group level, which uses the same bid for all keywords in an ad group.

Using metrics

You can further refine your budget forecast by using several key metrics and measuring these against business goals to see how much to spend using estimates in spreadsheets or with the Performance Planner tool, which is built into Google Ads.

For example, if your business goal is to drive brand awareness and bring 50 new visitors to your site each day of the campaign, it can be stated as a clear business objective. You can then establish a daily budget at the campaign level to determine ad delivery levels to achieve this business goal. 

As part of this process, you will be setting bids or applying the appropriate automated bid strategies to drive traffic and spend the campaign budget.

You can also use metrics like conversion rate to determine the number of clicks you need to generate to drive a conversion. Then, using CPC as a metric, you can estimate the cost of the clicks and the overall budget you require.

An essential formula to help with forecasting is your business goal divided by your website conversion rate. By dividing your business goal by the conversion rate for this goal, found in Google Ads or Google Analytics, you will get the traffic required to achieve your goal. Once you have the traffic forecast, you can multiply this figure by CPC to calculate the total cost. Then, you can estimate ROI based on this media spend.