Archive for June, 2009

Setting a Budget

Yesterday in Part Four of this series, I wrote about the Google Content Network.  In case you missed it, the basic theme was: don’t use it at first!

Today’s post is a short one, but covers a commonly asked question: do I use budget caps or budget optimizer or neither?  Or better yet, how do I determine a budget?

Well, first I am assuming that you are not made of money and therefore have a budget of some sort.  This assumption being true, the first thing to do is sit down and establish your budget.

How much can you spend this month and not go into debt?  How much do you expect to make?

Of course, Google takes your money before you spend it, before the clicks are delivered, while affiliate programs typically pay in the following month (for instance we pay on the first or second business day of each month now).  Even with the speediest payments, you spend a lot of money before you ever see one cent in return.  So you maximum budget is pretty much however much money you are willing to spend at first.

The Budget Optimizer, while it has some nice features, is flawed in one major way:  It is not focused on truly optimizing your budget for ROI, but rather to spend all of your money.  Whatever you tell it to spend, it will, even if it is not performing.

I read on the ABestWeb Forum a great line that says “Using Google’s budget manager is like giving your wife your credit card and saying ‘make sure you don’t come back with any money left’.”

Google even says so itself: “The AdWords system will always try to spend your entire daily budget during each calendar day that your ad is active.”

As you progress, you will certainly want to begin to look at software options for managing your AdWords account, but at first, just set a budget cap manually.  Then you can review the ROI and your available funds and adjust as necessary as the month goes along.

As you set your budget, try to spend less than what you actually can, in order to allow for delayed commission checks, unexpected expenses, and to make sure you don’t have to shut down your campaigns at the end of the month.

If you have $2000 to spend this month (and I know that may seem high to some newbies, but it’s a nice round number and you will get there before you know it), then I would recommend setting a daily budget of $50 per day.  This will allow you to spend $1500 in the month and have some left over for the following month as you wait for the commission check.  If there are unexpected expenses as the month goes along, then you can always lower the budget without shutting the campaigns down.

In a worst case scenario, if you do need the money for something else, don’t turn off your ads completely.  Just lower the bids a little (but not too much) and set your dayparting times to the highest converting times (more on dayparting soon) and lower your budget to $10-20 a day.  This way you stay active, get clicks, and keep up your CTR (click through rate) and Quality Score.

Coming up soon…keyword grouping, dayparting, tracking, and more.