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How should your ad budget impact campaign building?

Wondering how to make the most of your AdWords budget? Columnist Brett Middleton shares his formula for calculating search impression share so that you can make ROAS projections based on budget reallocation.

Everyone running a PPC account typically has a budgeting question they are trying to figure out. For those with a tighter ad budget, the question becomes, “How do I get the most leads for this limited amount of spend I have?”

Larger accounts run into their own problems; finding points of diminishing returns and making small gains in efficiency while maintaining spend levels at a point that generates the growth you need can be a headache.

If you take away one point from this, it’s that search impression share may be the most ignored primary metric for most PPC managers who are up against a budget. Search impression share is the number of impressions your ads actually received, compared to the potential number they could have received. For example, if there were 100 searches for keyword X, and you received 75 impressions, that would mean you have 75 percent search impression share.

This is important to think about because you may be leaving valuable conversions on the table. In this article, I’ll show you a way to look at impression share and do your own calculation for how many potential conversions you are missing out on with your current campaign structure and budget. Those of you who don’t trust Keyword Planner, this is for you.

As someone who has managed accounts across a wide range of budgets, I’ve learned a few things along the way, and my search for efficiency with higher spends has led to some observations about mistakes I made managing smaller budgets. Get ready for PPC budget management talking points!

Build your PPC campaigns “deep” or “wide?”

Deep PPC campaign building: Identifying your best performing campaigns and funneling the majority (or entirety) of your ad spend through them. This often requires not advertising for other products or services your company/client may offer that have lower ROAS (return on ad spend).

Wide PPC campaign building: After creating your initial campaigns, optimize in an attempt to elevate your underperforming campaigns to the level of your top-performing campaigns. Advertise for all of your products or services, even if they are slightly lower on ROAS.

If you have a budget that is smaller than the max ad spend possible for your keywords, you have decisions to make regarding budget allocation. This is a common problem for advertisers with many different products and services, especially when they don’t have much keyword overlap.

For example, let’s say you run the AdWords account for a recruiting firm that specializes in marketing, creative and IT hiring. The keywords for these three services are drastically different, so you have separate campaigns built that run at $100/day each (Your monthly budget was set at $9,000/month). Every campaign is limited by budget. The steps you’ve taken so far are:

  1. Utilize the Search Terms report to find exact/phrase match keywords to increase relevance and make your budget go farther.
  2. A/B test ad copy.
  3. Test sending visitors to different landing pages (e.g., the home page vs. the job listings page).

Performance is trending up slowly. The IT campaign has the lowest cost per conversion by roughly $50/conversion, but you’re working on improving the others. Although the value of a lead to your business is certainly more than $50, does it make sense to continue spending more for these other leads and limiting IT to the same budget?

As advertisers, we need to consider the impact something like this has on our ability to grow revenue (and subsequently our ad budget), as opposed to any benefits that come from uniformity in the sales pipeline. There are potential negative effects if we lower ad spend in creative and marketing, and therefore limit our acquisition of new talent for these positions, but this is when we need to see this as an opportunity for creativity and optimization.

By either a) reallocating spend to IT to increase overall ROAS, or b) Taking steps to project increased revenue from upping IT spend and getting additional budget to reach these goals, we are moving from management to optimization. Although Google Keyword Planner can be a good reference point, there is a relatively quick way that we can do the work ourselves and know exactly how the math is done.

How deep can your campaign be?

What you’re about to look at isn’t brain surgery, and may in fact be less accurate for you than Google’s Keyword Planner; but what it will do for you is provide a way to make your own estimates of how many possible clicks, conversions and impressions you are missing out on due to limited budgets or poor ad rank.

By understanding your search impression share, we can project what may have happened if you were to increase budgets in one campaign vs. another; if you are currently running several campaigns that are limited by budget, you can take important first steps to increasing efficiency and ROAS.

  1. Open your highest-performing campaign.
  2. Make sure Cost, CTR, Cost/Conv, Conversions, Conv Rate, Impressions and Impression Share are selected as Columns. (For a generally useful spreadsheet beyond this experiment, also export Quality Score, Avg Position, CPC, Search Lost IS [rank].)
  3. Export data to a CSV.
  4. Open in Excel/Sheets/Numbers.
  5. Create a “Missed Conversions” column with the following formula:
    • =(((Impressions/Impression Share)*CTR)*Conv %)-Conversions
    • Example: =(((G1/Q1)*P1)*M1)K1
  6. Copy this formula for all keywords.
  7. (Optional) Show estimated difference in spend per keyword with =Missed Conversions*Cost/Conv. This would obviously assume a static Cost/Conversion with scaling ad spend, but if you are concerned about this, it can be adjusted to =(Missed Conversions*Cost/Conv)*1.1 which would assume a 10-percent increase in cost per conversion with increased traffic.

What do you do with this data? First, take it with a grain of salt — it’s a projection. It doesn’t take into account shifts in CTR or CPC with increased budgets. But as you do this over time, you can start to compare your projections to actual data after you’ve made your budget adjustments and see how close you were.

You should also understand the average value of a lead or conversion, to tie results to dollars. This should allow you to get a better understanding of what will actually happen when you do this in the future; if you’re typically overshooting your conversion projections by 10 percent, you can make this a really valuable exercise by bringing that knowledge to each calculation. Being able to go into a meeting and say you’ll generate 50 more leads with an additional $2,000 in ad spend and have it actually happen is how you become a superstar.

Once we reach the point in our PPC management careers where learning the basics of bid management, A/B testing ad copy and other management tasks starts to feel easy, it becomes important to push ourselves and find new ways to push our campaigns. Every exercise like this that you put yourself through will be useful in some fashion.

The absolute worst-case scenario is that you do nothing with this information (or your proposal for budget reallocation or increases is turned down); but thinking about optimization in a way you haven’t before is absolutely crucial to your development as a PPC specialist. There will come a point where your work places far less importance on daily management tasks and requires innovative thinking/ financial analysis. Use this as a starting point.

(BONUS) I’ve narrowed focus, ad position is good. Now what?

When we consider Avg. Position to be a metric of importance, we’ve made a serious miscalculation. This isn’t to say that there’s no place for statements like, “We should increase bids on all keywords with less than x impressions and y average position.” The argument that average position often dictates opportunity isn’t what I’m arguing against. The problem comes when we don’t have an optimization strategy in place after this, beyond A/B testing ad copy or other techniques that often come into play.

When you’ve been managing PPC campaigns, or even if you’ve just researched AdWords’ ranking system, you are aware that the bid is only one component of your positioning. This can feel like the only thing we have control over, though — which is the wrong assumption to make.

When our keywords are in the position that gives us the best ROAS, the next step should be to focus on improving Quality Score. We need to fully understand how Quality Score is calculated and make this our immediate step two after bidding optimization.

A/B testing of ad copy should be done for a long enough time that differences in CTR are statistically significant, and Quality Score should be monitored while testing. Your landing page should carefully match ad messaging and needs to get the same attention as your ad copy. This can feel like the most daunting part of all. Enlist your developer to help with landing page edits, or use a builder/optimizer that gives you more flexibility in achieving message match.

The reason this needs to be an immediate next step after bid optimization is that without making Quality Score improvement part of our strategy at the onset of a campaign, it can all too easily fall by the wayside. Every PPC marketer wants their Quality Score to improve, but it’s important to take action and make this part of our routine.

by Brett Middleton
source: Search Engine Land