Forecasting Your Pay-Per-Click Budget in Google

Many website owners have experienced excellent results from running pay-per-click advertising campaigns with the search engines. But there are a lot of details to consider, such at what terms to use and how to avoid going over your budget. Jacqueline Dooley explains how to plan a pay-per-click advertising campaign with Google.

It can be daunting for website owners to set up a new pay per click campaign in Google. Taking the time to forecast your budget and understand your payment options will save you a lot of money throughout the life of your campaign while ensuring maximum exposure of your ads throughout the month. But how do you know what terms are going to cost the most and what amount of money you should bid on them? Google provides tools to help webmasters forecast their monthly budget, and there are various settings you can employ to ensure that once you’ve estimated your budget, you don’t go over it no matter what.

You’ll need to set up a GoogleAdwords account to access most of Google’s forecasting tools. It costs just $5.00 to set up an account and your daily budget can start at $.05/day. Once your account is set up you can begin using the advertiser tools.

Keep in mind that this advice is for the do-it-yourselfer. If you have an enormous list of keywords (over 200) and a budget of greater than $2000 a month, I recommend you either contact a Google sales representative to help you set up your campaign and forecast your budget, or work with an agency or consultant who has experience with Google Adwords. I want to clarify that although you may have a specific budget in mind, you will still need to forecast your monthly spend on Google so you can get an understanding of how much your keywords will cost you each month.

The Google Keyword Tool can help you determine what keywords people are searching for that contain your exact keyword or keyword phrase in the search query (Google deems these “specific keywords”) as well as related terms (dubbed “similar keywords” by Google).This tool is great for expanding and refining your keyword list. “Similar keywords” are derived from searches performed by the users who searched for the “specific keyword” even if their query does not contain the keyword in it. For example, if I do a search for “online marketing” and another search for “online business” then Google’s Keyword Tool will show both searches. Following are the results for a similar search.

Search: Internet Marketing

Results: (Specific Keywords)

  • Internet marketing
  • internet marketing guide
  • marketing on the internet
  • internet marketing strategy
  • marketing internet
  • maryland internet marketing
  • internet marketing center
  • internet marketing services
  • internet marketing plan

Results: (Similar Keywords)

  • marketing
  • e marketing plan
  • homebased jobs
  • web marketing
  • internet market
  • ezine advertising
  • online business

I can then review the list of similar keywords to see if I may have missed any juicy terms. If I find something interesting - ”online business” for example - I can run that term through the keyword tool to see just how connected it is to my campaign. Warning: this can become an endless cycle of research and elimination, so don’t drive yourself crazy with it. Start with a handful of terms (20 to 30 is a good rule of thumb) then revise and enhance your campaign based on actual results.

Once you have finalized your keyword list, you can use Google’s Traffic Estimator, which is available to advertisers only. The Traffic Estimator provides most of the critical information you’ll need to forecast your budget on Google including your keywords, currency type, maximum bid amount (if you leave this field blank, Google defaults to the recommended maximum bid for the #1 position) and geographic region where you want your ads to appear. The results look something like this.

Table 1 – Google traffic estimate for keyword list at maximum bid amount suggested by Google for #1 Position

Keywords Clicks/day Avg. CPC Cost/Day Avg. Position
Keyword 1 .4 $0.44 $0.16 1
Keyword 2 2.8 $0.33 $0.85 1
Keyword 3 5600 $0.44 $2,460.16 1
Keyword 4 5.7 $0.79 $4.49 1
Keyword 5 <0.1 $0.05 $0.00 1

Let’s go through the rows in the table one by one so you can see how they will relate to your end result – the monthly budget forecast. All of them are fairly self-explanatory, but there are a few things I want to bring to your attention.

Clicks/Day- This is the amount of times Google predicts your ad will be clicked on any given day based on the parameters you specified when you entered your keyword into the Traffic Estimator. Changing things like geographical region and maximum bid amount will change this number.

Avg. CPC- This is the average cost per click (CPC) for the keyword noted in the leftmost column. I have not specified any keywords because, as I mentioned above, this tool is only available to advertisers and bid amounts are confidential. Google never discloses the exact amount of any advertiser’s bid, but rather uses estimates based on aggregate information.

Cost/Day- This is how much the specific keyword in the left column will cost you per day, assuming the click estimates are accurate. Note that I said per DAY. I typically multiply the numbers in this column by 30 to get my average cost per month. Also note that this number is different from the maximum bid you specified. For example, you may have set a maximum bid of $1.00 per click for this series of keywords, but the average (actual) cost per click of the keyword is only $0.44. The maximum bid you set regulates where your ad appears in the sponsored listing results and how often it appears.

Avg. Position- This is the position your ad will appear in the sponsored search results if you choose to run the campaign with the maximum bid you specified in the Traffic Estimator (again, if you did not specify an amount then Google will automatically put in the maximum bid amount needed for the #1 position). Google doesn’t care about your monthly budget, so really pay attention when you’re setting this up. The number one paid search listing is often a highly competitive and expensive position and I do not recommend it for those who are watching their budgets closely. The top position isn’t always the best position in terms of leads and conversions, even though it may be the best position if you just want clicks.

I take the above information and plug it into my own Excel spreadsheet, where I can insert a couple of columns to get my final result. The shaded columns are the ones I added. I’ve calculated estimated clicks per month for each term, estimated cost per month for each term, and totals and averages for the month for the entire campaign.

Table 2 – Spreadsheet of Google’s traffic estimate with additional columns added

Keywords
Clicks/day
Clicks/month
Avg. CPC
Cost/Day
Cost/Month
Avg. Position
Keyword 1
0.4
12
$0.44
$0.16
$5.28
1
Keyword 2
2.8
84
$0.30
$0.85
$25.20
1
Keyword 3
5600
168,000
$0.44
$2,460.16
$73,920.00
1
Keyword 4
5.7
171
$0.79
$4.49
$135.09
1
Keyword 5
<0.1
0
$0.05
$0.00
$0.00
1
Totals/Averages
5608.9
168,267
$0.40
$2,465.66
$74,085.57
1

Of course the red flag here is keyword #3. It is extremely expensive not because of the cost per click, but because it is a very popular term. I have to ask myself at this point how badly I want to keep this term. Is it a multiple word phrase or a one-word term? How targeted would the traffic be if I left the term in? Assuming my monthly budget is $500 for Google, how many other more relevant terms can fit in if I take this term out? Without Keyword #3, the table looks like this.

Table 3 – Spreadsheet of Google’s traffic estimate without keyword #3

Keywords
Clicks/day
Clicks/month
Avg. CPC
Cost/Day
Cost/Month
Avg. Position
Keyword 1
0.4
12
$0.44
$0.16
$5.28
1
Keyword 2
2.8
84
$0.30
$0.85
$25.20
1
 
Keyword 4
5.7
171
$0.79
$4.49
$135.09
1
Keyword 5
<0.1
0
$0.05
$0.00
$0.00
1
Totals/Averages
8.9
267
$0.40
$5.50
$165.57
1

That’s well within my budget, but my clicks are drastically reduced. There are two ways that I can compromise. I can add more keywords, as I stated above, or I can change my maximum bid for the expensive keyword. This will also change the position and frequency of the term, but that’s okay because what I’m trying to do here is bring the cost down and bring the estimated traffic up.

Table 4- Spreadsheet of Google’s traffic estimate with revised values for keyword #3

Keywords
Clicks/day
Clicks/month
Avg. CPC
Cost/Day
Cost/Month
Avg. Position
Keyword 1
0.4
12
$0.44
$0.16
$5.28
1
Keyword 2
2.8
84
$0.30
$0.85
$25.20
1
Keyword 3
4200
126,000
$0.05
$210.00
$6,300.00
1.3
Keyword 4
5.7
171
$0.79
$4.49
$135.09
1
Keyword 5
<0.1
0
$0.05
$0.00
$0.00
1
Totals/Averages
4208.9
126,267
$0.33
$215.50
$6465.57
1

My monthly budget is still very high even though I reduced my maximum bid for keyword #3 to .10/click (Google estimates the actual cost of the term is about .05/click. The only thing I can do if I really want to bid on this term is separate it from the other terms by putting it in its own campaign and capping that campaign at $334/month, which is about the difference after I subtract the monthly cost for the other terms in my campaign. I can then monitor the effectiveness of this term, and if it is not pulling in valuable leads or producing sales, I’ll eliminate it from the campaign.

Google provides advertisers with lots of flexibility when it is time to set up the actual campaign. Each campaign can contain one or more ad groups. An ad group consists of a list of keywords with one or more ads associated with it. You might set up one campaign with three ad groups if you had several websites or product lines to promote. For example, a clothing store could set up three different ad groups for shirts, pants and accessories. The ads in each group would be specific to each product type and the keywords within them would relate specifically to the product. You can only set your budget at the campaign level, not at the ad group level. Thus, I highly recommend creating separate campaigns for each ad group so you can easily set your campaign budget on words that would otherwise max out your budget.

The details of creating a campaign on Google would fill up another article. Thus, I will just instruct you on how to set your campaign budget in the Google Adwords console. For new campaigns, simply follow the step by step instructions until you get to the screen that lets you enter your daily budget for that campaign. For existing campaigns, you can change your daily budget by selecting the campaign and clicking “edit campaign settings” from the campaign statistics screen. While this article is specific to budget forecasting in Google, I highly recommend you perform forecasting for all paid search engines included in your campaign (e.g., Overture, Looksmart, and so forth). Each engine provides different tools to advertisers for forecasting, but the end goal is the same – to plan out your bidding so that ad exposure is maximized and you stay well within the confines of your monthly budget.

It is important to remember that Google displays your ad based on your maximum bid and your budget restrictions. What this means is that if your budget is lower than Google’s recommendations for maximum exposure of your ads, then your ad will not show up every time someone searches for one of your terms. Google tries to disperse the frequency of your ad evenly throughout the time frame of your campaign, so that the campaign does not prematurely tap itself out.

Google offers two billing options – Post-pay and Prepay. If you Prepay and you run out of funds, then your ads will go down until the balance in your account is manually replenished by you. If you Post-pay…beware. Google charges for clicks received in the previous month, so it is very easy to go over budget if you are not careful to set limitations at the campaign level and keep a close eye on your campaign activity. This is why budget forecasting is so important. Remember to select your payment option carefully when you set up your Google account, because you cannot switch from Post-pay to Prepay and vice versa once your account is set up.

Google+ Comments

Google+ Comments