PPC advertising: how do budgets work?
A PPC budget is how much money is committed to online traffic acquisition efforts. It isn’t necessarily the amount you’ll spend, as charges only accrue after a user clicks on your ad.
Here are some tips for working out what your PPC budget should be.
1. Establish a profitability goal
Is there a measurable outcome for your campaign? Ask yourself:
- What’s my average order value? (AOV)
- What’s my gross margin percentage? (Revenue-cost of goods sold)
- What’s my cost per acquisition? (If unknown, set a goal to remain profitable)
Say you were looking for £5,000 profit in month 1 of running Google Ads.
You know the average order value of your product is £450 per sale, and the gross margin is 55%.
You would want to budget £7,375 per month for click fees, and never exceed a £147.50 cost per acquisition while running the ad campaign.
Number of Sales x AOV x Margin – Budget = Profit
50 sales x £450 of revenue per sale x 55% Profit Margin – monthly Google Ads budget = £5,000 in profit in the first month.
Use this equation to determine your ideal budget.
2. Identify keyword themes by intent
Conduct keyword research ahead of budget planning to determine a realistic monthly budget. By using a keyword planner tool, such as the Google Ads Keyword Planner, you can forecast what the monthly spend could be, as the tool can estimate the cost per click for your keywords and click through rate, depending on volume.
3. Analyse past performance
If you’re already running a paid search campaign, review whether your budget is high enough to fully fund every keyword theme you’re bidding on. Look at the ‘impression share lost due to budget’ metric under the ‘competitive’ metrics section within Google Ads.
PPC advertising: how do bids and auctions work?
A PPC bid (or keyword bid), is a bid placed in a PPC auction to help secure ad placement at the top of search results. You can bid on specific keywords or keyword groups with the aim of securing ad space for important terms that are highly relevant to your business.
Bid modifiers represent a certain percentage of the amount of the bid in terms of location, electronic device and scheduling. For example, you can set a maximum bid of £2 for a keyword, and ensure it only appears to users who are searching your keywords via a desktop computer. Geographic areas can also be specified, as well as certain times that your ads run. These are fantastic features that will ensure you are advertising in the most optimal way that fits with your target audience’s online behaviour. It’s a fantastic feature that ensures you’re making the most efficient use of your marketing budget.
Real-time bidding (RTB)
Real-time bidding (RTB) is the buying and selling of online impressions through real-time auctions. As an ad impression loads in a user’s web browser, information about the page it is on and the user viewing it is passed to an ad exchange, which auctions it off to the advertiser willing to pay the highest price for it. The winning bidder’s ad is then loaded into the webpage nearly instantly; the whole process takes just milliseconds to complete. Advertisers typically use demand-side platforms to help them decide which ad impressions to purchase and how much to bid on them based on a variety of factors, such as the sites they appear on and the previous behavior of the users loading them.
Why is RTB worthwhile, we hear you ask? Here’s an example – historically, if you wanted to reach sports fans, you’d advertise on sports-related sites. RTB now enables advertisers to target their ads to specific users instead. If the advertiser knows that a user has previously been looking at products on its site, they might be prepared to pay more than bigger brands to advertise to them as they’re more likely to convert into a paying customer. It’s worthwhile taking the time to investigate this search engine marketing tactic as it ensures efficient spending of your budget by allowing you to cherry-pick only the impressions you deem most valuable to you, avoiding any wastage on the wrong users. You also don’t need to work directly with publishers or ad networks by using exchanges and other ad tech, which offer a huge range of inventory across a wide range of sites.
Each time an ad is eligible to appear for a search, it goes through the ad auction. The auction determines whether or not the ad actually shows and in which ad position it will show on the page.
Here’s how the auction works:
- When someone searches, the Google Ads system finds all ads whose keywords match that search.
- From those ads, the system ignores any that aren’t eligible, such as ads that target a different country or are disapproved based on a policy violation.
- Of the remaining ads, only those with a sufficiently high Ad Rank may show. Ad Rank is a combination of your bid, ad quality, the Ad Rank thresholds, the context of the person’s search, and the expected impact of extensions and other ad formats.
Google states that the most important thing to remember is that even if your competition bids higher than you, you can still win a higher position – at a lower price – with highly relevant keywords and ads.
Since the auction process is repeated for every search on Google, each auction can have potentially different results depending on the competition at that moment. Therefore it’s normal for you to see some fluctuation in your ad’s position on the page and in whether or not your ad shows at all.
You can’t run a successful PPC campaign without having a solid understanding of Quality Score. This score has a substantial influence over the cost and effectiveness of your paid search campaigns. It affects how your PPC ads perform and how you pay for each click.
Quality Score is Google’s rating of the quality and relevance of both your keywords and PPC ads. It is used to determine your cost per click (CPC) and multiplied by your maximum bid to determine your ad rank in the ad auction process. Your Quality Score depends on multiple factors, including:
- Your click-through rate (CTR).
- The relevance of each keyword to its ad group.
- Landing page quality and relevance.
- The relevance of your ad text.
- Your historical Google Ads account performance.
These are the core Quality Score components. While it’s unclear about the exact proportion of influence each component has, the click-through rate is extremely important as it’s a strong signal to Google that your ads are relevant and helpful to users. As a reward, Google gives you higher ad rankings and lower costs. By optimising your Quality Score, you’re laying the foundation for a higher return on investment, as higher Quality Scores correlate with lower cost per conversion.
Tactics for improving your Quality Score range from regular keyword research to ensure relevancy, organising your keywords into refined groups that can be more effectively tied to individual ad campaigns, testing and refining your ad copy, optimising your landing pages to fit with your targeted ad groups and continually researching, identifying and excluding irrelevant keywords that are wasting your budget.
How do I get started with search engine marketing?
Having a well-thought-out SEM plan is key to making paid advertising work for you.
Tie it in with your marketing strategy/plan
Define your goals in line with your wider marketing strategy and business plan.
- Once users click on your paid ads, what do you want them to do?
- Are you looking to build a loyal customer base?
- Could you therefore direct users to sign up to your e-newsletter?
- Are you looking to increase sales?
- Can you direct them to an offers page?
The list goes on! Don’t forget, split testing is key to refining your ads and learning what’s most effective. If you have a number of goals, run different types of ads. You might discover that those who are searching your specific keywords are more likely to click on offer-based ads compared to ones where they have to submit their email address to download a whitepaper or exclusive offer (for example). Learn and refine as you go, always keeping your wider business goals in mind.
Asses the competition
Look at the current paid ads landscape for your niche.
- What’s it like?
- Are your competitors employing aggressive PPC campaigns?
- Which conversion metrics are they targeting?
Once you know what you’re competing with, you can plan a bid strategy that makes it easier for you to accomplish your goals.
Pick your PPC platform
Each has its benefits – Google has the highest search volume, but with that comes tougher bidding competition. Bing isn’t as expensive, but you get less search volume compared to Google. Your choice of platform depends on your unique business needs and audience. Run exploratory tests initially to work out which platform provides the best quality traffic.
The backbone to an effective PPC campaign. What keywords would your target audience use when looking for your products/services? Spend time finding the very best keywords that fit with your business offering. Depending on your goals, you might decide to focus on a few higher volume keywords if they’re the most suitable, or spread your coverage across a larger number of low-volume, highly specific keywords. A good mix of short and long-tail keywords is a great place to start, then you can analyse the results and refine and optimise from there.
Google’s Keyword Planner helps you research keywords for your search campaigns. It’s a free tool to discover new keywords related to your business and see estimates of the searches that they receive and the cost to target them. Keyword Planner also provides another way to create Search campaigns that’s centred around in-depth keyword research.
- Discover new keywords: Get suggestions for keywords related to your products, services or website.
- See monthly searches: See estimates on the number of searches that a keyword gets each month.
- Determine cost: See the average cost for your ad to show on searches for a keyword.
- Organise keywords: See how your keywords fit into different categories related to your brand.
- Create new campaigns: Use your keyword plan to create new campaigns centred on in-depth keyword research.
It’s important to bear in mind that while Keyword Planner can provide insights into keyword targeting, campaign performance depends on a variety of factors. For example, your bid, budget, product and customer behaviour in your industry can all influence the success of your campaigns.
A quick Google will also serve up a selection of additional keyword planning tools that will help refine your strategy.
Again, there are a number of tools online that you can use to help spot new keyword opportunities for your business. For example, Neil Patel’s Ubersuggest not only suggests hundreds of keyword ideas (showing you volume, the competition and seasonal trends), but it generates a list of keywords based on what’s working for your competitors and what people are typing into Google.
Budget and ROI
As mentioned previously, a PPC budget is how much money is committed to online traffic acquisition efforts. It isn’t necessarily the amount you’ll spend, as charges only accrue after a user clicks on your ad. See above PPC Advertising – How do budgets work for a useful formula to follow when planning your PPC budget. Understanding your figures at the very beginning will ensure you’re releasing the right amount of budget to encourage the best ROI from your campaigns.
Website landing pages
Ensure the website landing pages that your ads are pointing to hold up their end of the bargain. The page content needs to have a clear call to action, while providing the user with content that’s relevant to their initial search term. If your landing pages don’t fulfil the user’s search query, then your bounce rate will go through the roof (a user arrives on your website then immediately leaves). A high bounce rate sends negative search signals to Google, which could result in poor search visibility.
Ongoing: Review best practices
Unless you employ the expertise of a PPC specialist or agency, it will be up to you (or a marketing employee) to regularly review SEM best practices. Nothing stays still for long in the search-osphere. Keep up with trends to improve performance. For example, Microsoft (Bing) ads recently released video extensions, which appear next to an ad as a thumbnail and expand into a full video when clicked. Additionally, Google recently made changes to keyword match types including discontinuing broad match modifier (BMM) and expanding the reach of the phrase match.
It is critical to review technical keyword changes and determine if this may impact your account in terms of close variants or shifts in traffic volume. Ensure you:
- Brush up on everything you need to know on Google phrase match, as it has evolved and changed over the years.
- Review search term reports more frequently for irrelevant keywords that may pop up from match type changes. Incorporate these into match type changes or negative keywords lists as appropriate.
- Brush up on everything you need to know on Google phrase match, as it has evolved and changed over the years.
PPC: 4 ways to optimise for better ROI
Running PPC advertising campaigns should be treated as an ongoing learning experience with the aim to maximise your ROI over the time. Here are some of the ways you can optimise your campaigns to help you achieve better results.
Compelling ad copy ensures that your users actually click on your paid ads. This is one of the elements that needs to be continuously tested and optimised to improve click rates further, subsequently increasing traffic to your landing pages. Use clickthrough data from your PPC campaigns to determine copy variations that work best with your audience. When writing your ad copy, Search Engine Journal provides a useful best practice guide to keep in mind. Ensure you:
- Know what your target audience wants
- Address your audience with “you”, “your”. Being more directive and personable helps form a connection
- Use emotional triggers. Identify the core problem or desire that brings customers to you, then think about ways you can appeal to the emotion contained in it.
- Use numbers: Figures and statistics have a way of getting people’s attention and have proven to increase CTR. You can include your product’s price, advertise a sale, or talk about statistics e.g. We’ve helped accountants improve efficiency by 98% with our software.”
- Address potential objections. Is there a common reason why a user might not click on your ad? Do they think you could be too expensive? Or couldn’t deliver within a certain time frame? Address these objections head on in your ad copy e.g. “Starting from £xx”, ‘Free no obligation 7-day trial available’, ‘Speedy delivery within 48 hours’.
- Use your space allocation. Google Ads allows for three 30-character headlines and two 90-character descriptions. Pack your ads with information. Don’t forget about your display URL and ad extensions, either. Your display URL doesn’t have to match the actual URL that your visitors will land on – its purpose is to show people what kind of page they’ll be taken to, so creating a custom URL that includes your keywords is a smart move. Ad extensions can be another valuable way to get more real estate in search results. (Don’t rely on them to carry your message, though, since Google can’t guarantee that your extensions will show up every time your ad is run.)
- Emphasise your unique selling points
- Keep it local. People like and trust local businesses. Emphasis your location to appear approachable. If you have multiple locations, run separate PPC campaigns in different geographical locations. Use specific location-based terms for each campaign. Use local phone numbers in your ads if you can.
- Use strong, creative calls to action.
- Split test your PPC ads frequently…
The most efficient way to establish effective PPC ads is by regularly testing ways you can improve them. Data is your friend here. The more information you collect, the more patterns you’ll spot, helping you identify successes (and failures) so you can adjust your ad strategy accordingly.
Split tests can include different types of calls to action and where they’re placed in your ads, different display URLs, and the type of information included in your ads e.g. empathy, statistics, offers. You can also try highlighting different products or services, or if you offer one product or service, you could compare ads that focus on different benefits to the customers.
Again, this boils down to the equation mentioned previously to work out your profitability goal and ensure the best ROI. (See PPC Advertising – Budget section)
Impression share tells you how many times your ads have been displayed. Without impressions you won’t get clicks, leads or conversions. To improve your impression share:
- Focus on your ads’ Quality Score. Improve specific areas of your ads e.g. copy, keywords, audience segmentation.
- Stay relevant to keywords. Using broad match type keywords risks budget wastage on irrelevant clicks (but they do earn more impressions than phrase match!). Phrase match generates more than exact match. Focus on a good balance of match types to improve impression share.
- Filter out any negative keywords to earn higher impression share as a result of advertising to more qualified users.
- Increase your keyword bids for short term wins. This isn’t a great long-term strategy but is a useful tactic to boost impression share and assist in time sensitive campaigns such as launches, events and offers.
A quick Google will provide you with even more ways you can improve your impression share, such as geo-targeting and time-targeting.