Question 1

What Budget Do You Recommend I Start With?

Accepted Answer

There's no "right answer" to the question "what budget should I start with?" but here's what you need to know to make an educated decision.

Too High Can Be Bad

If you have a brand new ad account and/or a sales & marketing funnel that has not yet been thoroughly tested & honed, then exorbitant ad spend can put you at risk of overspending in areas that don't provide good results.

In the beginning, nothing has been tested just yet:

The algorithm doesn't know which combinations of ad copy, users, search terms, placements, etc. will work best
The ad management experts don't know which settings and campaigns and division of the budget will work best
The business owner doesn't know which parts of the website or call-to-action or lead magnets or emails will work best

If your budget is "too high" then it might outpace the manpower that's needed for iterations (i.e. marketing experts to edit the website, edit the sales pitch to match the new, cold leads from paid ads, fine-tune the settings in the ad account or the CRM email follow-up, catching & negating an irrelevant keyword, etc). It also might outpace the rate at which the algorithm can gather conversion data points to learn from (meaning the user interactions for the sales cycle to complete & the algorithm to observe what worked). It's impossible to know at what point this phenomenon will happen or even if it's happening, but this section is here to explain why we recommend starting with a somewhat conservative budget if it's a brand new ad account.

However, if you've run some ads recently (less than 30-90 days ago depending on how long your sales cycle is) then the algorithm has some data to work with, and if your website and other marketing assets have been tested & perfected then you are many steps ahead and can afford to be less conservative with your starting budget.

Too Low Can Be Bad

When a campaign doesn’t have enough ad budget to show the ad enough, it can have a compounding negative effect on campaigns.

More money = more opportunity for the algorithm to bid at the right time, the right place, and make sure to get the "easy" sale that it's been following for a while.

Here's a rough example: let's say a user interacts with one of your ads, and the algorithm sees them do it again a few days later... If it's out of budget that day, it might not have the opportunity to bid on that user's second search. A competitor's campaign that still has budget might scoop up this lead that was already invested in & "warmed up" by your ad a few days ago.

Budget limitations can also be detrimental to your return on ad spend, because the amount that you're able to spend per click will affect how far up on the page you’ll be. Higher up on the page means higher conversin rates since those users tend to be more eager to buy.

Another issue with low budgets is simply the lenght of time it takes to get through the "learning phase." Less money means fewer conversions and fewer conversions means fewer data points with which to optimize from. So, if it takes many months to get the hang of things, the business can run out of income in the meantime.

Then there's another compounding affect there, which is that more time exposes you to more shifts in the market. If the algorithm is watching a pocket of the market and trying to hone in on what works and then the weather changes...well, it's going to make it even more difficult & slower for the algorithm to decipher what worked well & when & why because you have that "market shift" factor pulling the rug out from it during the learning.

This is why we recommend raising the budget slowly & consistently in the first few months in order to find that perfect starting budget. Many times we discover a threshold where the return on ad spend begins to suddenly improves after a small budget bump.

Every Industry Has A Different Range Of "Ideal Min. Budgets"

What's your average CPA (Cost Per Aquisition)? If you sell consumer goods and your AOV (Average Order Value) is $60, then your CPA might be $20, for example. Whereas if you sell services and your LCV (Lifetime Customer Value) is $5,000, then your CPA might be $400, for example.

In one industry the algorithm only has to spend about $20 to get it's first conversion data point and in another industry the algorithm has to spend about $400 to get it's first conversion data point.

So, if both of these example companies start with a budget of $1000/month then the consumer good company will get about 50 conversions in the first 30 days and the services company will get 2 conversions in the same time period.

With only 2 conversion data points per month (and maybe only 1 in the first few months since it hasn't undergone any learning period yet), it's going to take the algorithm a long time to optimize itself towards what works (meaning which users convert, which search terms, which placements, which ad copy combinations, etc.)

So if your CPA is large, you will need to deal with larger ad budgets, even in the beginning, just to get things going fast enough before the business runs out of income.

Can You Give Me A Ballpark?

Sure.

If you have a brand new account & are working with low CPAs (like in the examples in the previous section), then we recommend choose a budget between $2000 - $5000 to start with depending on how patient you are to get through the learning/optimization phase & see results (lower budget means slower to learn/optimize but less money waste in the process and higher budget means quicker to learn/optimize but more money wasted in the process).

If you have a brand new account & are working with high CPAs (like in the examples in the previous section), then we recommend choose a budget between $5000 - $10000 to start with depending on how patient you are to get through the learning phase & see results (lower budget means slower to learn/optimize but less money waste in the process and higher budget means quicker to learn/optimize but more money wasted in the process).

If you have an account that has a good amount of recent conversion history, then we recommend starting with a budget that's the same (or a bit higher) than you were spending previously.

Whatever number you choose to begin with, we recommend raising the budget slowly & consistently in the first few months in order to find that perfect starting budget. Many times we discover a threshold where the return on ad spend suddenly improves after a small budget bump.

Question 2

Why Do You Bill According to Approved Advertising Budget, Not Ad Spend?

Accepted Answer

The “approved monthly ad spend” is a budget set by the Advertiser. Solutions 8 bills according to the approved budget regardless of the actual ad spend.

Let’s take a moment to explain this line in our PPC Agreement.

It sounds simple: set a budget, spend the money, increase traffic.

But the truth is, a whole lot of work goes into spending money effectively in Google Ads. In fact, Google often limits the amount of money you can spend on any given campaign. This means we have to do extra work to find new avenues for your ad spend in order to fulfill your budget.

So, let’s say we created three campaigns for your business and your approved budget is $10,000.

What happens if Google limits us to $2,000 on each campaign?

Well, with $4,000 left in the budget, we get to work.

The work behind the ad spend.

With money left over in the budget ($4,000 in this example), our team of strategists get to work to find new opportunities and pockets of traffic. What does this look like?

Conducting additional keyword research
Testing new bidding strategies
A/B testing new campaigns
Building different channels like YouTube and Display to expand outreach
Creating new ad copy

Traffic is inventory.

To visualize this spending challenge, let’s pretend that instead of asking us to purchase traffic for your site, you’re asking us to purchase apples—$10,000 worth of apples, to be exact.

We go to the nearest grocery store and purchase all the apples they have. But, we could only spend $6,000 (I know, that’s a lot of apples).

Now, we have to drive to every other grocery store nearby—maybe hours away or at tiny farmers markets—in order to spend the remaining $4,000.

Whether we hit our goal budget or not, the effort it took to drive around and find every apple possible was just as difficult (if not more difficult) as spending the full budget in one grocery trip.

To take this analogy another step further, this chase gets more difficult if the product is more obscure, like passion fruit or horned melon.

We’re not going to let your budget stay at an attempted threshold.

Overshooting your budget doesn’t benefit either of us.

If we have a difficult time meeting your requested ad budget in our first month together, we may give it another go—but we’ll never let your budget stay at a hard-to-match goal for long.

Basing our fees off the ad budget rather than spend holds us both accountable.

I’ll close with this:

Billing according to your ad budget enforces appropriate expectations by both parties. This keeps you from overspending and keeps us from depleting our resources chasing traffic inventory.

Additionally, there will be no surprises in your monthly billing; this keeps us from the meticulous nickel-and-diming that leads to management nightmares on both ends.

Watch our CEO, Kasim Aslam, explain this in more detail.

Have any other questions? We’re here to help!

Question 3

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 4

How Our Billing Works

Accepted Answer

Whether you’ve worked with an agency before or it’s your first time, understanding your contract can be confusing—especially when it comes to the billing process.

Fortunately, our billing is simple and straightforward. And in this article, we’ll show you how it works, help alleviate any confusion, and set expectations so you can manage your budget and payment a whole lot easier.

Getting started: What fees do I pay in the first month?

For all new accounts, we configure all settings and complete the account build based on the data you provide us. This is called a “campaign creation.”

Upon the effective date of the paid advertising management agreement, we’ll send the first invoice containing the campaign creation fee. This initial fee is billed one-time and only in your first month.

So, if the date of agreement is on July 8th, expect to receive invoice #1 on the same day.

How long does it take to launch my campaign?

It usually takes 10-12 business days for campaigns to go live. This includes the client’s completion of the onboarding process and providing proper access to accounts.

Now, it’s important to note that any delay in the onboarding could cause the campaign to be launched after the second invoice was scheduled to go out. And we’ll talk more about this in a second.

But before that, let’s jump to the next topic.

What fees do I pay for month #2?

Once the campaign is created and all set up, it’s time to manage and optimize.

This means we’ll do all the account optimizations needed to improve the performance of your account, including:

Bid management
Negative keyword implementation
Keyword expansion
Ad copy testing

And other relevant optimizations according to your optimization schedule based on your account’s ad budget.

This process is called “campaign management.”

One month after the effective date of agreement is signed, we’ll send out your second invoice–the monthly management fee plus the agreed percentage of the approved ad budget.

Learn more about why we charge an ad budget fee and why we bill according to the approved ad budget.

Moving on, the campaign management fee (also called “monthly management fee) is sent one month after the effective date you signed the agreement, but only if your campaigns were launched within the same month.

Going back to our example, if you signed the agreement on July 8th, then you’ll get the second invoice (monthly management fee) on August 8th.

But what if the onboarding was delayed and your campaigns were launched after August 8th?

Then you won’t receive any invoice until the day your campaigns are launched.

Say your campaigns were launched on August 10th. You’ll receive the second invoice (monthly management fee) on September 10th–one month after your campaigns went live.

From then on, expect to receive the future recurring monthly management fees every 10th of the month.

To help you visualize the billing timeline, we’ve created this infographic.

https://malcolm-en-gb.s3.eu-west-1.amazonaws.com/instances/MpD6OKc9u8/resources/hST1Lhi9hT/Paste%20(2021-06-25%2011-33-59).png (Paste (2021-06-25 11-33-59).png)

Want to know what it looks like with specific dates? No problem!

Here's an example of what the timeline looks like with exact dates.

Campaign is launched on-schedule (within month #1)

July 8 - Effective date the agreement is signed. Invoice #1 (campaign creation fee) is sent.

July 20 - Campaign goes LIVE.

August 8 - Monthly management fee is billed. Invoice #2 is sent.

September 8 - Monthly management fee is billed. Invoice #3 is sent.

Campaign launch is delayed (after month #1)

July 8 - Effective date the agreement is signed. Invoice #1 (campaign creation fee) is sent.

August 10 - Campaign goes LIVE.

September 10 - Monthly management fee is billed. Invoice #2 is sent.

October 10 - Monthly management fee is billed. Invoice #3 is sent.

And there you have it. If you want to know more about what happens in the back end within the first month, check out our post about how we organize and execute our client management process.

Question 5

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 6

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 7

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.