When you create your first AdWords campaign, one of the most important questions Google asks you is what your daily budget will be. It might seem like yet another budgeting decision, but that number can directly affect how much data you receive from your campaign and therefore how many adjustments you can make.
How Budget Affects ROI
Traditionally, businesses set aside a specific amount of money for their advertising budget. They then spend that money each month or each quarter to match their needs. At the end of the period, they review the results they acquired and then do the whole thing over again, this time with more data in hand.
With Google AdWords, that process can be shortened to a daily review or in some circumstances even an hourly review. Google AdWords, while not quite instant, provides nearly real-time data about your click thru rates, conversions and overall impressions for every keyword you bid on. That means you can create an ad, post it for a high traffic keyword and see if it works within just minutes of starting your first AdWords campaign.
So, budget has a direct impact on your ROI. If you set your daily budget to just $5, those clicks will be used up in one or two hours, depending on the number of impressions and the click thru rate of your ad. That’s not very much data. It might make sense to budget $150 a month when paying and reviewing quarterly, but when you can review data the next day, you should budget to acquire as much data as is needed to make a decision about your campaign.
Finding the Right Balance
At the same time, too many people set up their account with their entire advertising budget on day one and then just let it run. There needs to be balance between acquiring data and waiting to invest until you’ve successfully analyzed that data.
So, while spending only $5 a day is not enough to know whether your keywords are successful, spending $500 a day is entirely too much, because what happens if those keywords are NOT successful? Your goal is to find the sweet spot in the middle. Look for the spot where you receive enough clicks to know whether a given keyword will convert, but not so many clicks that you’ve burned through your budget for the rest of the month.
If you set up your account just right, you’ll be able to continuously tweak and adjust your campaign for weeks to come, constantly improving your conversion rates and as a result, your return on investment.