For businesses that prioritize profit margins and cash flow, the ability to manage an advertising budget is a fundamental skill. Overspending due to human error almost always means a difficult conversation with clients and stakeholders.
Allocating and managing a budget in PPC looked very different a decade ago. Today, as nearly everything gets automated, the terms of engagement are very different.
Here are the fundamentals behind a digital ad budget and how to manage your money in today’s PPC landscape.
How budgets work
The first step is to decide how much you’re comfortable spending on ads each month.
Setting a figure you’re comfortable with for at least 3–6 months is important to give your account enough time to work through the initial hiccups. This is especially important if your account is completely new.
Once you have a monthly budget defined, divide it by 30.4 to get your daily ad budget.
Note that some ad platforms like Google will spend up to double your daily budget on any given day as long as it doesn’t overspend on the month.
If you have an ad schedule in your campaign (e.g., you only run ads five days a week), you instead multiply the number of days per week your ads are active by 4.3 weeks in a month. Then, divide your monthly budget by that number to get your daily budget.
If you want to spend $100 a day, you could set that as your daily budget. You may spend up to $200 per day, but at the end of the month, you won’t spend more than $3,040.
A more advanced tactic is to set higher budgets and control the spend with aggressive bid management, such as a CPA or ROAS target.
This will allow the system to spend more if it’s hitting specific goals or sees an opportunity while still holding back based on performance.
How to allocate budget by platform
Budgets live at different levels on different platforms. Google Ads requires you to assign them to campaigns, whereas on other platforms, you can assign budgets to ad groups or ad sets.
When I take discovery calls and work with clients, I try to suggest budget allocation based on account structure and where they’re most likely to see the best return.
This is how I make recommendations about how to break down a PPC budget based on the type of advertiser.
Ecommerce
For ecommerce, there are really three different profiles of companies:
If you’re a mass retailer of multiple brands and products that already have tremendous demand available to capture, you typically want to start with Google Shopping. Examples of accounts that fit this description:
Supermarkets that sell a range of products.
Electronics stores selling mobile phones, computers and kitchen appliances.
Apparel resellers with hundreds or thousands of products from multiple brands.
The other category is private label, where you sell your own product.
Typically, you have fewer SKUs and your goals include generating a bit more awareness and demand. These advertisers lean a bit more on Meta for advertising:
Direct-to-consumer (DTC).
Consumer packaged goods (CPG).
Branded commodities.
The main difference between these two types of retailers is that the former is really just capturing demand that’s already there (at the bottom of the funnel), while the latter is also creating demand around their particular products.
Some brands lean 90% Google, with just retargeting and the basics on Meta. Others skew 90% toward Meta and create demand while capturing brand and basic comparison shopping demand on the Google side.
I mention these platforms because a key part of budget allocation is not spreading yourself too thin across different ad channels, especially if your account is new or you haven’t validated them yet.
But many brands also do well on both. These are typically ones with a large amount of search volume around their products but also do well pushing people to purchase (e.g., impulse buys, fashion accessories or anything else highly visual).
1. Poor Account structure:
Brands will run 100 campaigns, with poor segmentation, spread the budget super thin, then wonder why they are not profitable.
I will also see the wrong type of campaigns often. For example, cold search without much conversion data regarding converting…
— Mr. Google Ads | Ecom (@AliHabibPPC) September 6, 2024
Lead generation
When it comes to lead gen PPC, I like to consider whether there is already search demand on Google for what I’m trying to sell. If so, I start there. If not, I will start on Meta and fill out the funnel from there.
If we start with Google, where people are already searching for keywords related to the service you provide, we sometimes layer on paid social media for retargeting and some prospecting.
Other times, there’s just not a lot of search volume for what you’re trying to sell – maybe it’s a newer product or service.
In these cases, you should usually start on the paid social side, where leads are almost always cheaper and easier to get. They might not be as high-quality as leads you would get through Google, but it’s a stepping stone.
How to allocate budget by assets
Most accounts that have been running for a while know what their most profitable campaign is – an evergreen, a moneymaker or a golden goose. It could be a particular product line, a level of service, a location or any other descriptor.
This is where you want to invest the bulk of your budget, particularly when using algorithmic campaigns like Advantage+ or Performance Max.