Bid management gets all the glory in PPC Advertising. But budget allocation is just as important. Budget allocation really is an under-appreciated science in Pay Per Click Advertising.

Bid management is a “Bottom Up” management process – you spend most of your time working on trimming down bids on your worst keywords first – if not just eliminating them. Then you usually make your way up to optimizing bids on your best keywords.

PPC Budget Management is a “Top Down” management process. In the context of education it would be the opposite of “No Child Left Behind”. Budget should always be allocated to your best performing Campaigns first and whatever is left can go to your poor performing Campaigns.

We operate by these ten rules when it comes to PPC budgeting:

  1. Don’t allocate your budget Per Engine. Doing so assumes that all Campaigns within each engine perform the same. They obviously do not. If you reduce your total MSN budget by 1%, to give to Yahoo you are taking money away from the best performing MSN Campaigns, as well as the worst performing ones and giving it to possibly even worse performing Campaigns on Yahoo, along with Yahoo’s best performing ones. Always allocate your budget by the Campaign – Regardless of which search engine they are on.
  2. Allocate budget According To Actual Conversion Performance. Don’t be swayed by what you want performance to be or what you think it should be. Be data driven and let your audiences conversion performance determine how much you spend.
  3. Use Search Engine Tools To Figure Out What You Can Spend on Your Best Performing Campaigns. Google’s Campaign Budget Estimator Tool is pretty good at letting you know if you are not spending enough. Yahoo’s Campaign Budget Estimator tool often underestimates what you could actually spend but its good for establishing minimum budget, and you need to just rely on daily spending averages for MSN.
  4. Use Google Campaign Reports To Determine Impression Share Metrics. Add columns for IS Budget and Exact Match IS. If the Conversion metrics are good for the Campaign use the impression share data to figure out how many impressions you are losing to inadequate budget. Also look at Lost IS Rank metric to figure out opportunities to try and improve impression share with new keyword specific ad copy that will improve your Quality Score and ability to spend.
  5. Split Your Keywords into separate Branded and Unbranded Campaigns. It’s tempting to lump branded and unbranded keywords together – especially when you use them for the same product. But they just don’t perform the same and you need to split them into separate Campaigns. When you use both branded and unbranded together, oftentimes the branded keyword success can subsidize or make up for poor performance on the non-branded keywords. OK Rule 5.a – always separate good keyword groups from bad ones in separate Campaigns and budget accordingly.
  6. Consider Using Content Network Only Campaigns. Believe it or not I have some Google Content Network Campaigns that out perform their Search Network performance. Why not budget them separately.
  7. Make an Awesome Budget Worksheet. But don’t stop with just one, make two budget worksheets. Make one budget worksheet that accounts for every day of your month and determine what your total account daily budget should be. Make another budget worksheet that divides out your remaining monthly budget by the remaining days left in the month (A Catch-Up Budget Worksheet). We use a normal budget worksheet for most of the month and start using the Catch Up Budget Worksheet if and when we either get way under or over budget going into the end of the month.
  8. Pace Yourself. Determine what you daily budget is from your budget worksheet and check your progress every day to see if you are over or under budget pace. Realize that the engines can over spend your daily account budget to make up for slow days, but if you are way ahead or way behind the pace you shouldn’t rely on the search engines to get you caught up.
  9. Don’t Be So Strict on Your Best Campaigns. Yahoo has a great feature that lets you remove daily campaign budgets from any Campaign (Your best ones in this case) and rely on just a daily Account Budget to keep you from overspending for the day. We also budget more than we think we can actually spend on our best performing Campaigns on the chance that they might actually spend it. If that actually happens and we go over budgeted pace we just start using our catch up budget worksheet to get back down to pace.
  10. The Bigger The Budget, The More Time You Spend on PPC Budget Management. You should be making more efforts to be more granular in your campaign structure as you spend more money. That means more Campaigns with smaller keyword focus. Doing this ensures that you budget as much as possible to the areas that perform the best from a conversion basis. Consider turning some of your best Ad Groups into Campaigns. Look at trying to improve Quality Scores of your best Campaigns so that you can get more impressions and spend even more on them.

Efficient PPC budget allocation takes time. I’m not aware of any automated way to do it that is flexible enough to adapt to your success metrics and trends in the search market. It might not matter as much for smaller spending PPC accounts, but it’s absolutely a full time job for large spending PPC accounts. “Set it and forget it” is not an option if you want to maximize your success metrics. We spend hours every day working on budget for our largest PPC clients. Are you and should you?

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