Budgeting for paid ad campaigns has long been a static process – set a monthly budget, monitor spending, and adjust incrementally as needed.
This method works for industries with stable demand and predictable conversion rates but falls short in dynamic, competitive markets.
Still, static budgets aren’t obsolete. In industries with long sales cycles, consistent conversion trends, or strict financial planning – like B2B SaaS and healthcare – planned budgets remain essential.
The key isn’t choosing between static and dynamic budgeting; it’s knowing when and how to adjust PPC spend using data-driven signals.
The role of Smart Bidding and Performance Max in budgeting
Automation has changed our budgeting strategies, but it hasn’t eliminated the need for human oversight.
While Google’s Smart Bidding and Performance Max (PMax) campaigns help optimize performance, they do not fully control budget allocation the way some advertisers may assume.
Smart Bidding: What it does (and doesn’t do) for budgeting
Smart Bidding (i.e., Target ROAS, Target CPA, Maximize Conversions, and Maximize Conversion Value) uses real-time auction signals to adjust bids but does not shift budgets between campaigns.
If a campaign has an insufficient budget, smart bidding won’t automatically pull spend from another campaign; this still requires manual adjustments or automated budget rules.
To overcome the budget allocation limitations of Smart Bidding, use:
Portfolio bidding strategies: Setting bid strategies at the campaign level lets you use a common bidding approach (e.g., Target ROAS or Target CPA) across multiple campaigns. This enables more efficient spending across campaigns with similar goals without manual adjustments.
Shared budgets: Assigning a single budget across multiple campaigns ensures high-performing campaigns receive adequate funding while preventing overspending on lower-performing ones.
Dig deeper: How each Google Ads bid strategy influences campaign success
Performance Max: A black box for budget allocation?
PMax automates asset and bid optimization across multiple Google properties (Search, Display, YouTube, Discovery, etc.), but you don’t control which channel yorur budget goes to.
Google’s algorithm decides how much to allocate to each network, which can sometimes result in excessive spend on lower-performing placements like Display rather than Search.
Instead of relying solely on PMax, run separate Search campaigns alongside it to ensure an adequate budget is allocated to high-intent traffic.
Dig deeper: How to make search and PMax campaigns complement each other
Balancing automation and control: Avoid these PPC budget pitfalls
While automation streamlines bidding, it can also lead to costly mistakes.
Watch out for these common budget-wasting pitfalls and learn to stay in control.
Overspending on low-value traffic
Smart Bidding sometimes aggressively increases bids to meet a Target ROAS or Target CPA, which can inflate CPCs without increasing conversion volume.
Solution
Set bid caps when using Maximize Conversion Value to prevent excessive CPC increases.
Monitor search terms to ensure increased bids aren’t capturing low-intent queries.
Advanced tip
When setting a tCPA or tROAS, allow a 10-20% margin for flexibility to help Google’s algorithm optimize effectively.
For example, if your ideal tCPA is $100, setting it to $115 gives Google room to secure conversions that may exceed your target while still delivering strong performance.
Since tCPA operates as an average, not every lead will cost the same amount.
Once you are consistently hitting your target, gradually lower the tCPA (or raise the tROAS) to improve budget efficiency without restricting conversions.
Underfunding efficient campaigns
If a campaign has a long conversion delay (i.e., B2B lead gen), Smart Bidding may incorrectly shift the budget elsewhere before enough data accumulates.
Solution
Extend conversion windows in Smart Bidding settings. The default is 30 days, but advertisers can adjust the window from one day up to 90 days.
Manually monitor lagging conversions and adjust budgets proactively.
Lack of budget control in PMax campaigns
Performance Max doesn’t allow advertisers to set separate budgets for Search, YouTube, and Display.
As a result, Google may (advertiser sentiment is that they do) favor low-cost clicks from Display rather than higher-intent Search traffic.
Solution
Run branded and high-intent non-branded Search campaigns separately to control budget spend on direct-response traffic.
Use brand exclusions in PMax to prevent Google from serving brand search queries within PMax, ensuring that branded traffic remains in the dedicated Search campaign.
Apply negative keywords via account-level negatives. While PMax doesn’t allow campaign-level negatives, account-level negative keyword lists can help block irrelevant or redundant queries. The maximum number of negative keywords allowed to be applied is 100. Google has stated that it created this limit because PMax isn’t meant to be a heavily restricted campaign type.
By monitoring your search impression share, you can identify when branded queries are slipping into PMax instead of the dedicated Search campaign. This will allow you to adjust bid strategies and audience signals accordingly.
Use audience exclusions in PMax to prevent excessive Display spend on irrelevant audiences.
Advanced tip
Tools like Optmyzr can help advertisers determine how their budget is allocated in PMax with the PMax Channel Distribution feature.
Although we may not have much control over the allocation, we can at least be aware of it.
Dig deeper: How to manage a paid media budget: Allocation, risk and scaling
How to use first-party data to improve budget allocation
An underutilized strategy for improving budgeting is leveraging first-party data to allocate spend toward high-value audiences.
As privacy restrictions tighten and tracking capabilities decline, it’s important to shift your focus from broad automated bidding to first-party audience targeting.
Use customer match to prioritize high-value audiences
Instead of spending equally across all users, advertisers can upload Customer Match lists (based on past purchasers, high-LTV customers, or CRM data) and adjust budgets accordingly.
Example
If historical data shows that repeat customers generate a higher ROAS than new users, more budget should be allocated to remarketing campaigns targeting Customer Match audiences.
Advanced tip
To maximize campaign efficiency, consider using value-based bidding (VBB) to ensure your budget prioritizes high-value conversions rather than just the volume of leads.
By assigning different conversion values based on customer lifetime value (LTV), using Customer Match, GA4 insights, or CRM data, you can direct more spending toward audiences that generate the highest long-term revenue.
Changes to customer match lists
Google recently introduced two key updates to Customer Match lists that will impact how advertisers manage audience data.