How high should I set my initial AdWords budget?
The answer is surprisingly complicated to come up with, and it's even more difficult to allocate.
A Challenge in Allocating AdWords Budgets
AdWords budgets are generally set per campaign, per day (i.e. you set a daily budget for each of your campaigns). This usually gets complicated because most advertisers have multiple campaigns.
Now imagine having broken up every campaign into three campaigns along these lines, and you can start to see how it might be a challenge to allocate say, a $100 daily budget into so many little pieces. Some campaigns might exceed the daily budget limit, and then shut themselves down, where as other campaigns might underspend, leaving unallocated budget.
Of course, having unspent budget at the end of a day isn’t inherently a bad thing. (Unless you're an agency specifically tasked with spending a specified budget). Furthermore it's almost impossible to know ahead of time exactly what the split between mobile search, Google desktop search and display inventory will be.
Introducing Shared Budgets in AdWords
All of the above is just to motivate the need for a new feature in AdWords, released Monday, called Shared budgets in AdWords.
Shared budgets in AdWords let you establish a single daily budget that’s shared by multiple campaigns in an AdWords account. Shared budgets can make it easier to match your AdWords spending along the lines of your business or marketing objectives, rather than having to split it up along campaign distribution options. Let's walk through an example of how to set your AdWords budget using shared budgets in AdWords.
How AdWords Shared Budgets Work
Say you’re a vendor of business software for contact management. Suppose you’re currently running three campaigns for your software product, broken down by desktop search, display advertising, and mobile search.
Your overall marketing plan allows you to spend $100 per day across your three campaigns. Without shared budgets, you’d next have to decide how to allocate the $100 daily AdWords budget across each of your three campaigns. If you don’t necessarily know or care how the amount is split between display advertising, mobile search, and desktop search, using a shared AdWords budget is potentially a great solution.
This means that AdWords will make automatic budget adjustments across campaigns, so you don’t have to constantly monitor and change individual campaign budgets throughout the day.
How to Set Your AdWords Budget Using the New Shared Budget Component
It's not exactly easy to find. You need to use the shared object library area of AdWords, which I personally think is a bit of a bad neighborhood in terms of AdWords usability, but anyway, here it is. You just "Create a new shared budget," give it a name and amount, then save it, as shown here:
Once you’ve created the shared budget, you can then apply the shared budget from any campaign setting pages, like this:
Who Wins, Google or Advertisers? Should You Avoid Shared AdWords Budgets?
Now that I’ve described what AdWords Shared Budgets are and how to use them, let’s think about whether using Shared Budgets in AdWords is even a good idea in the first place.
(Believe it or not, not every AdWords feature has the best interests of advertisers in mind...)
For example, I realize you could easily make the argument that this new feature could be less about helping advertisers and more about helping Google drain every penny of available budget from your account to increase Google Revenues and Earnings. Quite simply, by aggregating budgets across different campaigns (with each campaign having different levels of available ad inventory), it’s more likely that Google will be able to spend the specified budget amounts.
A key question is when does the Shared Budget kick in? For example, I would be concerned if an AdWords budget was shared between a very fast campaign (as in, a campaign that racks up lots of impressions, clicks and cost at a very fast rate) and one or more slower campaigns.
The risk here is that the faster campaigns would suck up all the available budget quickly, leaving little or no budget for the slower moving campaigns, which might have undesirable effects. For this reason, I would caution against sharing budgets across dissimilar campaigns (i.e. campaigns with different objectives). For example, don't create a shared budget called "my total daily AdWords budget" and share that across all the campaigns in your account.
Other than that, it seems at first glance to be a reasonable way to manage budgets across similar campaigns. Have you used the new AdWords Budget Sharing feature in your AdWords account? Why or why not? Let me know what you think in the comments below!
About the Author
Larry Kim is the Founder and CTO of WordStream, Inc., provider of the 20 Minute PPC Work Week and WordStream Advisor, an Award-Winning PPC management platform. You can follow him on Google+ and Twitter.
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