The amount you spend to purchase traffic depends, essentially, on what the traffic is worth to your business. This factor is where your marketing goal meets your budget. A positive return on investment (ROI) is easy to quantify when the campaign is geared to selling products directly. In that case, your return is calculated simply by subtracting expenses from sales. As long as the result is a positive number, your budget can be sky-high, because every dollar spent on clickthroughs yields (on average) a profit.
“Spending” is perhaps a misnomer when budgeting in AdWords, which comes close to being a direct sales channel. (A direct sales channel is one in which the consumer can take immediate action that results in a sale.) As with any other advertising venue of this sort, ad spending takes on a new light when it can be directly connected to gain. What limits should be placed on a budget whose every spent dollar returns (on average) more than a dollar in revenue? No limit, obviously. You might not make a living on a very slim profit margin — for exam-ple, if every $1.00 spent returns $1.01 in average revenue. However, even a one-penny profit justifies the ad campaign and encourages the advertiser to Figure 7-7:
An effec-tive land-ing page encourages action and makes conversion easy for the visitor.
increase its daily budget. Naturally, if you’re experiencing a slim profit margin in AdWords, you might need to find ways of increasing that margin and sell-ing more profitably through other channels.
With all this in mind, the real question becomes, What is your experimentation budget? Here’s another, admittedly harsher way to phrase it: How much can you afford to lose before you figure out how to make a campaign profitable?
As I mentioned earlier in this chapter, a successful AdWords campaign requires initial experimentation to shake out the bugs. During this debugging, key-words are discarded, new keykey-words are added, daily and per-click budgets are tweaked, and the campaign structure is sometimes torn down and rebuilt.
Each test of the budding campaign costs some amount of money, and that amount is variable. (More on the dollars and cents later.) Take comfort in one happy realization: Utter failure is the cheapest option. Not that I wish anyone failure, but the truth is that if your campaign fails to generate clickthroughs, you’re not billed. Your only expense while grinding through multiple failures is the five-dollar fee every third time you reactivate your account.
Of course, almost every campaign with substantial ad impressions induces some clickthroughs, even if the CTR is insufficient for both you and Google.
You must pay for those clicks. But the streamlined payment model makes the testing phases relatively painless financially.
After you find the sweet spot in which working keywords match ideal bidding levels, and your campaign generates profitable clickthroughs, it’s time to open the floodgates and expand your budget dramatically. When clickthroughs yield a positive ROI, you want as many clicks as possible and should be happy to pay for them.
Aggressive budgeting, with important limits, is usually a smart move with AdWords. Consider your AdWords experience as consisting of two phases:
Testing
The ongoing operation of a mature campaign
The purpose of testing is to determine whether your keywords, bids, click-through rate, ad copy, and landing page work together for a gainful ROI. A certain volume of impressions is needed to determine whether the current configuration works. (When testing, your impressions can be thought of as a statistical sample that becomes more meaningful as it becomes larger.) Google regards 1000 impressions as a meaningful sample, and begins slowing the dis-tribution of underperforming keywords after that number has been reached, campaign-wide.
Your priority should be to get the news, good or bad, as quickly as possible.
The key to avoiding overspending dangerously during AdWords testing is a combination of vigilance and the daily budget setting. AdWords doesn’t allow you to build in a campaign stop based on the number of impressions, like a stop-loss order for a stock. If that setting were possible, you could set the campaign to stop after 1000 impressions and go to the beach for the rest of the day. As it is, the daily budget is your stop-loss order. You can also use the End date setting to stop the campaign after one day. Thengo to the beach.
Keeping in mind the need for testing, the preference of receiving meaningful feedback quickly, and the desire to avoid overspending, the following is one step-by-step plan for budgeting an AdWords test. Don’t worry for now about the mechanics of creating an Ad Group or using the Traffic Estimator; these points are covered later in the chapter, in the “Creating an AdWords Account”
section. (Chapter 9 delves into both points in more detail.) 1. Create an Ad Group.
Your Ad Group consists of keywords and at least one ad associated with those keywords, plus a cost-per-click bid that applies to the entire Ad Group.
2. Using the Traffic Estimator, observe what Google estimates you will spend per day, and decide whether you can afford one full day of testing.
The Traffic Estimator (see Figure 7-8) is not infallible, but it does give you a ballpark idea of the campaign’s cost.
3. On the Edit Campaign Settings page, adjust your daily budget.
You might want to peg your daily budget to Google’s estimate of daily cost, or you might want to set it lower. The campaign will end before the day ends if you spend your daily budget amount first. There’s not much point setting the budget higher than Google’s suggestion for a one-day test. Remember that Google reserves the right to overrun your daily budget by 20 percent, but never overbills a campaign’s monthly budget total.
4. Still on the Edit Campaign Settings page, set an End date if you can’t closely monitor the campaign’s progress.
This setting is valuable if you believe that you’ll get enough reporting data on the campaign’s first day and might not be available to pause the campaign manually.
When setting your Ad Group’s maximum cost-per-click (CPC), ignore Google’s initial suggestion that appears in the bid-entry box. Nobody knows where those preposterous default suggestions come from; I believe Google pulls them in from The Twilight Zone.Play with different CPC amounts and observe what they do to your estimated ad placement and your estimated daily expense. Acquiring the number one position for your keywords might seem too expensive, and knocking your CPC in half could keep you in the second or third spot while getting your daily expenses under control. Fiddle with the CPC amount until you find the estimated sweet spot for your budget and visibility needs.
The lesson here is that arbitrarily setting a low daily budget while testing, purely in the interest of saving money, merely prolongs the test. There’s no way to avoid purchasing the clicks necessary to sustain the campaign until it reaches a decent number of impressions. The faster you correct failed tests, the sooner you get to a profitable campaign. The fastest track to positive ROI is a willingness to make the daily expenditures necessary to test quickly.
Figure 7-8:
The Traffic Estimator helps determine the best CPC bid for your Ad Group’s keywords.