Google Ads budget is a very important and sometimes intimidating topic. These ads have ‘a reputation’ of being expensive, which is not necessarily accurate for all the advertisers.
Deciding on the appropriate investment is usually very confusing for businesses that are only starting to create their first campaigns. We’ve covered this topic before giving some tips on how new advertisers can figure out their Google Ads budgets, but today let’s talk about businesses that are already running Google Ads campaigns for some time, and that want to make sure they have an optimal budget for their goals.
If you are already running Google Ads campaigns, one of the main budget-related questions you might have is “should I invest more money in my campaign or is the current budget enough?”
It’s a valid question! Here are some quick and easy steps you need to go through to get an answer.
First of all, let’s check if there is any notification from Google saying that your campaign is limited by budget. Usually, you will see it immediately when you open the Campaigns tab.
If you see that your campaign is marked as limited by budget, try to click on the notification and Google will suggest how much money you should add to your campaign, whilst keeping the same settings, in order to lift the limitation. If this value is acceptable to you, the quickest fix will be to accept the new budget.
But if the budget that Google suggests seems too much for you, don’t get upset, there is a way around it. Go to the Campaigns tab, click on the name of the campaign in question. Then go to the Settings tab and check which kind of bidding strategy this campaign has. If the campaign is using Manual CPC, just switch it to any automated strategy (for example Maximise Clicks) and Google will automatically optimise your bids to fit the budget, and the campaign will stop being limited.
But what if you are already using an automated bidding strategy? In this case, you will most likely not get the notification that your campaign is limited by budget. But maybe the campaign is losing some valuable impressions, and it really needs a budget boost. Let’s check.
Go back to your Campaigns tab. At top of the table look for Columns and then click Modify Columns. Click on Competitive Metrics and select Search Lost IS (Budget). This will add a column showing the percentage of the impressions for which your ads were eligible but weren’t shown because of the insufficient budget. If you see a big number there, for example 64%, then you’d better consider increasing your campaign’s budget, as you are losing 64% of ad impressions due to the lack of funds. But if you see 0% or some small number, this means that your budget is perfectly enough and you can only optimise the ads in terms of rank. In this case, adding more money will not bring you any difference whatsoever.
Another question you may have is “how often should I re-evaluate and change my Google Ads budget?”
We’ve seen companies deciding campaign budgets on a daily basis, constantly changing it. Every day they open Google Ads, see the previous day’s performance and adjust the budget ‘for today’. This may be a tempting opportunity for hands-on business owners that like to keep everything under control. But we firmly advise against this practice, which will make your monthly spending difficult to predict and will also ruin your campaigns’ results.
Yes, we know that when setting up a campaign in Google Ads you are prompt to set your budget as ‘an average you want to spend EACH DAY’. So, what you might think is “I want to spend € 20 per day” and set the campaign budget accordingly. Two days later you decide to go slow with the ads and change it to € 5 per day. And you are calculating your monthly spending to be exactly:
(number of days with the first budget) x € 20 + (number of days with the second budget) x € 5
Right? Well, fast forwarding to the conclusion, we can tell you that this logic is not 100% correct, but let’s continue so you can understand why.
You keep adjusting your budget like this almost every day, confident that you have everything under control, but then you see your actual monthly spend, and it catches you by surprise – it is not what you’ve calculated. Why is that?
When Google Ads asks you for an ‘average you want to spend each day’, you need to keep in mind that the operative word here is ‘average’. Whilst you are asked to setup a daily spend for your campaigns, Google actually calculates the budget on a monthly basis; so that your actual daily spend may be lower or higher than the value you’ve entered, as long as your monthly budget is within your planned value. Why? Well, because Google Ads tries to drive you as many conversions (or other goals you might have) as possible, and if the system sees that on a given day there is a nice opportunity to get more value for your money, it will invest more that day than your average daily budget, making up for it on another day by investing less.
So, how do you know your monthly budget then? You take your daily budget and multiply it by 30.4 (the average number of days in a month). This way you get a value that you are sure Google will not exceed that month.
But what happens if you change your budget in the middle of the month?
There is no crime whatsoever in changing your budget midway through the month – your strategy might change; your promotion period might end; you can have a very valid reason to do it. But if Google Ads calculates the budget on a monthly basis, how will it be calculated when you change it halfway through?
It is easier to explain if we use an example – let’s say that, at the beginning of April you had a daily budget of € 20 per day due to a limited-time promotion that you were running on your website. On the 16th April, you were planning to change your budget to € 5 per day, as the promotion would come to an end, and you would go back to your ‘normal’ spending. In this case, to calculate your monthly spend limit you would use the following logic:
(what you’ve spent during the promotion from 01/04 to 15/04) + (the 15 remaining days x € 5)
Now, in a perfect world, where Google would spend the exact same amount of money each day (preferably the whole budget), your total spend for the month of April would be:
15 x € 20 + 15 x € 5 = € 375
So that would be your plan. But knowing that the actual spend may varies, let’s assume that during the first 15 days of the month, for some reason, the search volume (i.e. the demand for your product) was lower. In this case, your account instead of € 300 (15 x € 20) spent only € 210. And that means that, at the time of the budget change, you would expect the total spend for April to be up to (€ 210 + 15 x € 5 =) € 285.
Pretty easy, right? But not what you were initially counting on. And what if the situation was the opposite and Google noticed a higher demand in the beginning of the month and would spend more than the ‘average daily budget’ during several days, planning to make up for that at the end of the month? The number would be different again!
Now, imagine that you are changing your budget several times per month or, even worse, every day. Soon enough this calculation will become rather confusing and it will be very tricky to determine your monthly spending limit – your actual spend each month may surprise you.
Another reason for why it is not advisable to constantly change your budget is that every time you make a change, your Google Ads enter a ‘learning’ phase.
The system needs to analyse the data and to ‘learn’ the way to accommodate your new budget in the most efficient way. Therefore, if you keep changing this setting, the system never gets a chance to actually finish its learning and show you its full potential to drive better results.
In short, the main conclusion is a simple one – only change your budget if it’s really necessary and if said change is supposed to last for quite a long time.
If you just want to optimise the spending a bit, try changing the bids instead. If you are using an automated bid strategy and you cannot change the bids, try organising your Google Ads by dividing your products or services between different campaigns, so that you can change the budget only where it is absolutely necessary, leaving the rest of the account untouched.
And if you are positive you need a budget change, do it, but calculate your monthly spending limit correctly, so that there are no surprises at the end of the month. Oh, and wait for the system to finish its learning process and bring you the results after each adjustment, before rushing to change it again.
Google Ads should not intimidate or frighten you – the more you research and know its features and possibilities, the easier it gets. And if you want to learn more about Google Ads strategies, feel free to check out other articles and free content we have on this topic on our blog.