Question 1

Why is my profit margin becoming thinner as we scale?

Accepted Answer

When you increase ad spend, it's common to see an increase in your CPL or a decrease in your ROAS. Here's why.

Increasing our ad spend means we are targeting a larger audience. These are people who aren’t ready to buy––and it takes more clicks and longer time to convert them.

Simultaneously, we are competing with big players who have enough money to over-bid on keywords. This brings our CPC up.

The more we expand the audience size, the less certain Google’s algorithm will be when they show an ad. That’s because we’re pushing the algorithm to go into uncharted territory––it doesn’t know who to target yet.

If our low-hanging-fruits are composed of only a small portion of our audience, it’s hard for Google’s algorithm to determine who will go for the click.

So we need to warm up our audience and add “brand awareness” strategies until the top-of-the-funnel audience gains familiarity with our brand.

For example, we can run a display ad that targets a proactive (not remarketed) audience. This might not get many clicks but we’ll get views that can increase our brand awareness.

How do we spend more without diminishing profit margin (i.e. lowering ROAS or increasing CPL)?

It is nearly impossible to increase your budget without thinning your profit margin, at least for a short time.

To balance it, we recommend temporarily “leaning out” your account when trying to scale. This helps you preserve your profit margin while waiting for the algorithm to adjust to a higher ad spend.

Here are a few of ways to do that:

Pause brand awareness campaigns like video shopping
Scale back brand campaigns by reducing budget and or changing bids
Find brand keywords that are taking money in the other search campaigns

When a campaign isn’t limited by budget, we can often increase the spend without lowering ROAS by much at all.

But what if your account has maxed out its spend and reached its entire market/audience?

Use lower-spend outbound campaigns. These are campaigns like YouTube or Display that help increase your brand awareness and introduce your offer to a new audience.

Start running these campaigns with a lower budget and analyze how they affect your overall campaign performance.

You will sacrifice your ROAS with these new outbound campaigns. So it’s best to keep the ad spend low in the beginning.

As a result, your main campaign conversion driver should become more active.

You’ll be able to increase your outbound campaigns’ budget incrementally.

Question 2

Should I share budget between multiple campaigns?

Accepted Answer

Shared budgets are not ideal but they can be useful - In the beginning of a campaign launch, you might decide to put campaigns into a shared budget in order to help determine how to divide up the budget. You will be able to let the algorithm decide what to show based on how much demand (impressions) there is.

Question 3

How do I decide whether a campaign can spend more even when it doesn’t say “limited by budget”?

Accepted Answer

If you have extra ad spend to work with (or if you pause another campaign and need to allocate its budget), check out the impression share (IS) lost to see if an existing campaign can take on the new spend. If (IS) is lost due to budget OR due to rank, then it most likely can. This is due to the cyclical nature of bids:

Rank determines your ad’s position in the results.
Rank is affected by bid.
Bid is set based on what the business can afford (for example, [Max CPC] = [Break Even CPL] * [Conversion Rate]).
Higher Bid = Higher Ad Position = Better Website Visitors = Higher Conversion Rate (clicks to leads) = A Higher Bid can be afforded. So, you can sometimes raise the bid in the anticipation that the conversion rate will increase by guesstimating what it will increase to and “putting the cart before the horse.”
If NOT Smart Shopping campaign - you might temporarily switch the campaign to a manual CPC (with enhanced CPC enabled) bidding strategy if it was using an automated bidding strategy before, because the algorithm most likely isn’t intelligent enough to push the max bid in this way.
If Smart Shopping - it’s not possible to switch to manual, so here are some other options:
- Give it more budget in order to get it to increase the bid
- Before increasing the budget, make sure the product feed is optimized by including a lot of optional information that helps with rank. Be sure to optimize your feed during the eCommerce setup process.

Question 4

What if I have a small budget of $500 monthly?

Accepted Answer

Accounts with small budgets (~$500) can be extremely difficult to optimize because there’s often not enough data to recognize patterns.

For example, if a keyword got 1 click last month and 1 click this month, should we increase the bid for that keyword? Well, 1 click is not enough information to make an educated guess.

In this case you may need to manually edit the budget twice per month because you want to spend the majority of it in a short amount of days and then pull back.

Do not turn on monthly budget because then it will spend that money evenly throughout the month, which isn’t ideal.