How to Make your Annual Paid Search Budget for Maximum Returns?
March 11, 2016
The life of a paid search marketer is full of deadlines and commitments and his calendar is certainly no exception.
Drafting a budget for the next year is also a big responsibility and it comes with a deadline.
So, if you have also been assigned the job of making an annual paid search budget by your client, your business owner or your SEO agency, this article is for you.
If you are responsible for marketing and advertising, I’m sure you’re fully aware of the fact that generalizations don’t work here.
This article discusses the nitty-gritties of drafting an annual budget for paid online advertising.
Discovering Useful Information from the Data Available
The data related to your account’s performance the previous year can be your guide to drafting the budget for the next year.
You can easily access this data through your ad platform or some internal resources, if you’re new to this company or the project at hand.
Let’s see how you can use this data.
If you see the last year’s budget was trimmed by 10%, you can’t expect any big boost this year as well.
Assuming there is no big change in the external factors (such as industry growth or a shift in technology), your last year’s budget can very well dictate the shape of your present budget.
So, what are those external factors that impact your current budget?
As far as drafting a paid advertising budget is concerned, your reporting manager or advertiser is your client and you have to convince them that your project numbers are realistic.
Many business owners like to see the breakdown of the annual budget into monthly projections. However, almost everyone is interested in getting to know the areas where they couldn’t achieve much. They will also be interested in finding the areas where increased activity can be helpful in increasing sales or revenues.
Let’s discuss this in detail.
The Industry Outlook:
As per research published by eMarketer, adspend by the Financial Services industry towards paid search in America has been consistently rising since 2013. From $5.3 billion in 2013, it’s expected to hit the $10 billion mark by the end of 2018. This projects a compound annual growth of slightly more than 12%. However, the “growth rate” is decreasing every year from 2013’s figure of 16%.
Here’s an interesting graph to review:
Now, look at the ad budgets of the marketers in this industry.
Over 50% say they would like to maintain their current ad spending.
Nearly 40% want to ride this wave of growth and would opt for increased spending.
While almost nobody wanted to cut down on ad spending.
Now, it’s clear that the trend is of growth and increment as far as paid search marketing budget is concerned.
We can clearly see that the trend is of growth but the rate is declining every year. The growth rate was 14.5% in 2014-15, which came down to 11.3% in 2015-16.
Enter into the zone of some dirty ground battle of calculations!
When we start preparing the ad budget for 2016, let’s consider the compound annual growth of 12%. Now increase the last year’s budget by an optimistic figure of 12%.
Our monthly analysis of previous year’s account performance reveals that our monthly budget was varying, largely because our annual ROAS (Return on Advertising Spending) and therefore the overall budget was fixed.
This might have decreased our profit margins.
As a matter of fact, you can make a lot of changes in the monthly spends based on that month’s performance.
You can also cut the ad-spend in an unproductive month, if you see that it can be compensated in some other productive month. What’s more important here, are the overall annual results.
Credible Data Sources You can Use to Figure Out Your Ad-Spend:
A. Google Trends
You can use Google Trends to know how your brand is performing year over year. An increase in awareness by 2x definitely makes a business case to increase ad-spend by good margin this year.
B. Overall Impression Share
If we look at the monthly picture using this metric, we’ll see that the distribution of impression share is not uniform across different months. You would also notice that you might be making loss due to rankings with capped budgets. You can also request for additional budget for the best performing months where revenue targets were either met or exceeded.
C. AdWords Traffic Estimator
You can use AdWords Traffic Estimator to explore your growth opportunities. The budget estimations provided by this Google tool will tell you the traffic you’re missing out on.
There are some other things as well that you should consider to draft a good budget.
1. Keyword Considerations
The keyword selection should be according to the buyer journey. For example, the first time visitor might be just exploring the options, he might not be necessarily looking to buy your products. So, we should have the combination ofhigh funnel (targeted traffic, quality leads) keywords and low funnel keywords (making informational offers).
2. Choosing Search vs. Display ads
If you are planning for a business segment where remarketing campaigns prove more successful (e.g., ecommerce / online shopping), it makes good business sense to raise ad spend on display ads. Of course, average conversion rate for Display Network Ads in a specific industry will have to be considered.
3. Search Engine (Google vs Bing)
You can also consider Bing, if you think that is more cost effective for you and meets your revenue targets.
4. Device (Mobile vs Tablets vs Desktops)
You may also distribute your ad spend according to the devices your audiences might be using.
So as a smart marketer you can use every bit of available information at your disposal to explore new opportunities. The other factors responsible for a good budget are identifying the periods where there was good growth and also where you encountered not-so-good results. As a smart marketer, you must learn to play with the fluctuations. The better you’re at this game, the smarter you would be in drafting budgets.
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