We tend to craft budgets based on major objectives and real-world business timing.
This makes sense, as our real-world priorities should influence where we put our marketing dollars and at what velocity.
However, many don’t take the ad platform mechanics into consideration when setting initial, growth, and lower priority budgets.
This can mean successful campaigns tank due to too much investment too quickly, or that previously successful campaigns don’t behave after a period of pausing.
We’re going to invest some time discussing:
The mechanics of budgets.
How much to invest at the beginning.
How to scale campaigns without tanking them.
How to preserve lower priority campaigns.
It’s important to note that this post will do its best to abstain from opinions on account strategy.
There are many paths to profit, and while I have strong data-backed feelings on which paths have a higher probability of success, the point of this post is just to look at budgets.
As such, I’ll be sticking with Google and Microsoft, though some of the points can apply to Meta, Amazon, and LinkedIn.
The Mechanics Of Budgets
Before we dive into the core topic, it’s important to establish a baseline of how budgets work.
Advertisers set daily, monthly, or lifetime of the campaign budgets. When you set a daily budget, Google and Microsoft will do their best to hit it as an average across 30.4 days.
For example, if you wanted to invest $2,500 per month in a campaign, you’d set a daily budget of $82.24.
While it’s possible for that budget to double (i.e., you could spend up to $164.48 in a given day) across the 30.4 days, it should still come up to $2,500.
If you want more control than that, you can use portfolio bidding strategies to include bid floors and bid caps.
Image from author, November 2024
Bid floors (minimums) ensure you’ll bid enough to enter the auction.
These can be helpful when you know your budget is a bit low for the campaign targets, and there’s a real risk of Google/Microsoft underbidding to conserve your budget.
Bid caps (maximums) are safeguards against wild spikes in the auction that force you to bid more than you’re prepared to invest with a single click.
These spikes often happen when you’re going after expensive ideas and/or you’ve set a lower ROAS goal.
If you’re interested in a more detailed outline of bidding, you can check out this post that goes into it in depth.
How Much To Invest At The Beginning
Now that we have our baseline established, let’s talk about beginning budgets.
There are two main considerations when establishing a starting budget:
Is the account brand new, or are there existing campaigns that can give it a halo effect?
Does this campaign represent a test or a core part of my account?
We can debate the ethics of this, but brand-new campaigns in new accounts almost always cost more than new campaigns in established accounts. This is because ad platforms need data, and if you’re starting from scratch, you won’t have:
Account conversion thresholds.
Meaningful Quality Scores on your campaigns.
Established negative and placement exclusion lists.
I typically budget in at least 20% extra for all new campaigns in brand-new accounts for the first three to four weeks. This allows the campaigns to gradually build up their data and for me to eliminate waste.
Once the campaigns have begun bringing in conversions and they seem to be spending at an expected level, I’ll lower the budgets back down to the expected budget provided the following things are true:
The impression share lost to budget is less than 5%.
Stakeholders aren’t hungry for more volume and are happy with the current CPA/ROAS.
If the campaign is being launched in an existing account with at least 90 days of data and trustworthy conversions, I’ll set the budget based on the agreed-upon goals and value.
Before launching the campaign, it’s critical to have a conversation that includes the following information:
How many leads/sales are we currently getting, and where can that number grow without any operational change?
Will customers always be worth the same amount, or is the value dynamic?
Are there drastically different conversion rates based on how a customer engages, or are they essentially the same?
These questions will ensure you budget enough to get enough clicks in your day to get enough valuable leads for your conversion rate to kick in.