What’s the Right AdWords Budget for You?
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Google Ads
November 3,2014

What’s the Right AdWords Budget for You?

What’s the right AdWords budget for you? The answer – It’s complicated. Deciding how high to set the budget for your AdWords campaigns can be a surprisingly tricky task, especially if you are a new advertiser to the platform and have not previously run a campaign before. Setting a budget too high often results in over saturating your market to the point where you may no longer be able to generate additional profit for your brand. That said, setting a budget too low may be limiting your exposure and resulting in missed sale or lead opportunities.

So how do you hit that ‘sweet spot’ for your AdWords spend? The reality is that finding the right budget often involves a lot of trial and error. However, we’ve provided 3 quick AdWords budget hacks that will hopefully allow you to quickly estimate what you should be spending across your account to achieve your SEM objectives.

1. Spend Based on Account Conversion Performance:

Our first tip to set your account budget is to look at what impression share is most profitable for your brand and use this to benchmark your maximum spend.  This will require historical data to be present within your AdWords account.

Looking at the example below, the account conversion rate and click through rate increase when the search impression share increases. This suggests that the advertiser should be aiming for an impression share of above 80% across high performing terms. Achieving an impression share lower than this figure may result in fewer conversions.

impression share conversion

Using the following formula, you can estimate how much spend you may require to maximise your exposure and achieve the highest conversion rate for your brand.

Required Spend1 = (Current search Impression share/Current Spent)*(Ideal search impression share)

1Includes amount currently spent

2. Spend Based on Competitor Activity:

Our second tip to set a budget for your AdWords campaigns is to be reactive to your online competition, matching or exceeding their account spend to increase the chances gaining a few new customers for your brand.

To set a budget based on what your competitors may be spending you will need to have been running an AdWords campaign long enough to gather some auction insights across your keywords. We suggest at least 30 days of data.

Access this data by navigating to the ‘Keywords’ tab and selecting ‘Details’  > Auction Insights > All. This will bring up the impression share (i.e. how often ads were eligible to be shown) for your brand, as well as the competitors who are bidding across your campaign keywords.

The first thing you will need to do with this data is determine what budget you require to achieve 100% impression share across your terms. Calculate this with the following formula:

Maximum Impression Share = Current Monthly Budget for the Specified Campaign / Current Impression Share for the Specified Campaign

Once you have obtained this figure, multiply your competitors current impression share with the required budget needed to achieve 100% impression share. This should give you an estimated spend figure that your competitors are using for their AdWords campaigns and allow you to identify if you have set a budget within the same ball park, so to speak.

3. Spend Based on Historical Search Trends:

Our third tip to set a budgets for your AdWords campaigns won’t provide you with an exact spend figure, but it will allow you to be pre-emptive in your budget allocation. The aim with pre-emptive budget allocation is to base your spend on expected search demand for the coming months ahead. This can be achieved through two methods.

The first is to use The Google Trends tool (which can be found here: www.google.com/trends), which will allow you to compile the average search demand for your product or service categories.  Identify which month’s peak for your product or service and take note of this – These months will likely require a higher spend to maximize your impression share. As such, be sure to scale back your spend during the months where demand is lower so that you have spend to allocate during these higher demand periods.

Heat Map - Trends

The second is to look at your historical keyword data. Conduct a year on year analysis and identify when certain terms or categories within your AdWords account see spikes in search impressions and clicks.  As with the Google Trends method, this should allow you to identify months when terms require higher budget allocation and months where you can scale back on certain terms.

If you’re not sure about how to best allocate your AdWords budgets, be sure to contact our SEM team at Search Factory for an account audit.

Google Ads
November 3,2014
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