Managing the Budget: How AdWords Paces Your Daily Budget
Keyword choices and matching options, ad structure and content, bidding strategy, networks… these are all critical factors that help determine whether or not your AdWords campaign will be successful. But one of the most important decisions you’ll need to make when setting up a new Google AdWords campaign is something you’ll need decide in one of the first steps of your campaign setup: your campaign’s daily budget. A campaign’s daily budget is the highest you’re willing to spend on your AdWords campaign on any given day, and that number can greatly impact the success of your campaign. But with so many people performing searches and so many advertisers trying to deliver ads to those potential customers, how does Google actually keep you within your daily budget while still maximising the effectiveness of your ads? Understanding this can go a long way towards helping you choose your daily budget and ultimately how effective your campaigns will be.
First let’s make sure everybody has a clear understanding of how AdWords works. When it comes to Google’s search network, it’s best to think of AdWords as a series of auctions on things that people type into the Google search bar. When setting up an AdWords campaign, advertisers tell Google how high they’re willing to bid when a customer clicks on a specific keyword. These are called keyword “cost per click” bids (or CPC bids). So while CPC bids tell Google how much you’re willing to spend on each keyword, the campaign’s daily budget is the cap you’re willing to spend on those bids on an average day, and ultimately the maximum cost you’ll pay in a month.
So assuming your ads are effective and you’re actually using up your AdWords daily budget, how does Google keep you within your daily budget while still allowing your ads to deliver as much as possible? Understanding these two important techniques can help you understand how to maximise your AdWords performance:
- Over Delivery (aka “Monthly Pacing”): Over Delivery is a way for Google to pace your campaign over the course of a month. Daily Budget is not actually a hard cap number for any given day. When Google says “Daily Budget”, what they really mean is the average daily amount for a MONTHLY BUDGET. Google will never let your campaign consume more than 30.4 (the average number of days in a month) times your daily budget. But in any given day, Google can exceed your daily budget by as much as 20%. They do this because search traffic can vary greatly depending on the day of the week. And some types of keywords are used more heavily in different times of the month than others. Google will compensate for this by “over delivering” your ads on days when they are doing particular well and traffic is particularly favourable. But over the course of a month Google will make sure to slow down your impressions to ensure that you don’t exceed your daily budget. So if you have a daily budget set for $10 per day, Google can spend as much as $12 on clicks on one day, but has to compensate for this by spending an average of $8 on another day in the same month. For campaigns with lower budgets, this may result in more impressions and clicks for ads on one day, but a lower number of impressions and clicks on another day.
- Standard Delivery (aka “Daily Pacing”): Standard delivery is a way for Google to pace your campaign over the course of a given day. Let’s go back to those keyword auctions for a second. When somebody types a search query into Google and the auction for that keyword begins, the bidding values in that auction can vary greatly depending on the keyword. Some keywords with little demand might not cost much, but some of the more highly competitive keywords (specifically keywords related to insurance, loans, mortgages, legal services, donations and education) can be very expenses. And the higher the CPC rate is for a keyword, the more it’s going to eat up your daily budget. And don’t forget, once you use up your daily budget, your ads no longer show for the rest of that day! So instead of allowing your ads to eat up your budget early in the day, Google attempts to pace the delivery of your ads by evenly distributing your daily budget across the entire day (12am to 11:59pm) to avoid using up your daily budget early in the day. So if you do a search for one of your keywords at 9am and see your ad, but not at 11am, this is actually Google attempting to make sure your ads are still showing at the end of the day as well.
Once you have a good understand of those concepts, we encourage you to utilise these AdWords best practice tips:
- DON’T PANIC IF YOUR ADS DON’T SHOW 24/7: Because of these “pacing” techniques, Google may not show your ads every hour of the day. If this is the case, don’t panic! It’s a good thing! It likely means you’re using up your daily budget and Google is doing its best to ensure your ads show evenly throughout the day and consistently throughout the month.
- Don’t force Google to pace your ads: To see your ad in context, don’t search for your keywords on Google’s search engine. Instead, use Google’s free Ad Preview and Diagnosis Tool. This tool will check on the status of your ad for a particular keyword without harming your performance by accumulating ad impressions.
- It’s an Investment, Not an Expense: Think of your AdWords costs as an investment, not an expense. The goal here is to achieve a positive return on investment (bringing in profits that are significantly greater than your costs) rather than necessarily keeping your advertising costs low.
- Change is Good: You can change your campaign daily budgets at any point depending on performance. If you’re using up your daily budget and the demand is still there and the return on investment is positive, increase it. If there’s no positive return on investment, lower it. If you’re spending as much as you’re comfortable spending and don’t want to increase your budget, there are numerous techniques that can be employed to maximise results without spending more on a daily basis.
- Quality Score is king: One of the biggest factors besides your keyword bid that Google uses to determine your ad’s position and whether your ads will show at all is your “Quality Score”. Quality Score is a measure of how relevant your website’s landing page is to the keyword in question. Instead of spending more money on higher bids with increased daily budgets, you can improve your AdWords performance by improving your website (and ultimately your quality score) through Search Engine Optimisation techniques for that specific keyword.
More questions about AdWords daily budgets? Contact us at Kook and let’s chat!