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Google AdWords Budget Allocation Explained

Effective budget allocation and how spend is distributed to campaigns within your Google Ads account is a vital factor to how efficient your PPC marketing campaigns are and how well they perform. The first step to calculating budget for your account is to establish an overall monthly budget that you are willing to invest for your online advertising. There are 3 important components to consider when planning this;

1. How Many Campaigns Do You Have?

If you have, or intend to create a high number of campaigns then it is likely that you will need to consider investing more for your overall monthly budget. This isn’t always necessarily the case and is dependent on various factors, but generally the more campaigns you have the greater the risk of spreading the budget too thinly between campaigns.

2. How Much Does Your Monthly Budget Work Out Per Day?

Campaign budgets in Google Ads often operate on a daily basis rather than monthly. It is possible to set up a collective monthly budget for all/a group of your campaigns, or to allocate individual daily budgets for each campaign. It is important to calculate your overall daily budget for your account as you will need to know this before dividing between campaigns, and also in order to regularly monitor account spend.

3. Daily or Monthly budget?

There are pros and cons to using both campaign total monthly budgets and individual daily campaign budgets. Campaign total budgets: Pro: these allow you to merge all/multiple groups of campaigns into one monthly budget, making it easier to manage overall account spend and ensure that it does not exceed monthly budget. Con: as all campaigns are merged under one monthly budget this leaves you unable to allocate budget specifically and redistribute spend according to higher/lower performing campaigns. Individual Daily Budgets: Pro: provides better cost efficiency and allows you to allocate different budgets for individual campaigns, meaning you can increase spend where campaigns are performing well and reduce spend in areas that aren’t. Con: can be harder to control spend and manage your monthly budget, increasing the necessity to monitor spend due to a greater risk of exceeding the budget. Important note: The value of the set daily budget is not necessarily how much will be spent each day, as you are simply setting the budget cap or maximum that you are willing to spend per day. Often a lot of campaigns won’t reach the maximum of the allocated budget, especially if they are narrowly targeted and aren’t receiving a high volume of clicks. It is also possible to spend up to double the allocated daily budget in any given day. This is known as over-delivery and is due to Google showing ads more frequently on popular days and reducing impressions on other days with less searches to compensate. Within a single billing period however you will never be charged more than your daily budget times the average number of days in a month (30.4).

Google AdWords Limited By Budget

A commonly occurring issue with budget in AdWords accounts is when campaigns are limited by budget. When reviewing your campaigns in your account you may notice a ‘limited by budget’ status present on some campaigns within the budget column. What does this mean? This status means that people are searching for your keyword terms, but you are missing out on potential impressions and showing your ads to these people. This is because your AdWords campaign budget has already been used up. How do I solve this? One simple way to solve this is to increase your budget, which is what Google will suggest you do in most cases. The problem with this is that you may not have the budget to do this, and a lot of the time this isn’t the best or most effective solution. Another (and often better) solution is to lower the keyword bids within your campaign. You may find you actually have a reasonable budget, but are bidding substantial money on your keywords to rank in 1st position. For example, if you have a daily budget set of £10 and are bidding £2 on keywords, you may rank in 1st position for your ads, but they will only allow five clicks before your budget is drained. Despite it usually being better to rank higher for your ads, if you are limited by budget it’s generally more effective and efficient to rank 2nd or 3rd and show your ads frequently than to show in 1st position just a few times. Estimated position bids in Google Ads is a good way to review how much you should be bidding on keywords in order to achieve certain ranks for your ads. Deciding the best solution is dependent on the circumstances and different aspects, and it is important to correctly diagnose the issue beforehand. If you require further help or advice with your Google Ads Budget or anything else regarding PPC marketing, contact our team today or read our blog for more digital insights.
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