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Balancing Budgets and Keywords



Imagine you have an Account with one Campaign, one Ad Group and one Keyword.  In our mythical world, there are always exactly 1000 searches that could match against this Keyword, and your Ad always produces a CTR of 10%.  Each click always costs $1 so your daily budget of $100 always gives you 100 clicks.  Now imagine if you introduce another Keyword with the same performance figures, but the daily budget remains the same.  You now have two Keywords which, between them, could potentially match against 2000 searches and accrue 200 clicks at a cost of $200, but your daily budget is only $100 so Google has to compromise and show an Ad for each Keyword match only about 50% of the time when it could.

This probably sounds very obvious, doesn't it?  But why then do we so often see the following situations being presented to us?

  1. An AdWords user has added a number of new Keywords - sometimes an entirely new Ad Group - to a Campaign without changing the budget, and is asking why they're now getting fewer clicks and/ or sales from their existing Groups that are "unchanged".
  2. An AdWords user has over 10,000 Keywords in their Account and runs a test of AdWords performance with a budget of just $10 a day.
The real world isn't, of course, anywhere near as simplistic as the model I used in the example above, but if anything the added complexity of varying CPCs, automated optimisations, multiple Ad Variations, etc. only make it more likely that adding Keywords without changing budget will affect overall performance.
#1 above is a particularly interesting example as it could well be the cause of what might otherwise seem to be an inexplicable loss of performance.  Let's say you were running an Account with 5 Ad Groups and 100 Keywords in total.  The Account makes a reasonable Net profit from AdWords so you decide to add another 3 Ad Groups and 60 Keywords or so, and increase the budget a little.  This sounds very reasonable, but if you've not increased the budget enough you could well be taking clicks away from the other established Groups and limiting their effectiveness.  We've seen more than one post in the AdWords Community where users have seen a drop in performance with "no apparent reason".  The danger here is of course particularly high where newly introduced Keywords have a high search volume compared to existing ones, but don't convert particularly (or at least as) well.

#2 is quite fun when you see someone proposing a new Account structure that usesmillions of Keywords and you kindly and carefully point out that a valid test of such an Account would probably require a minimum of a six-figure daily budget.  Maybe even $1 for every Keyword, perhaps much much more.   Per day.

#2 is less fun when you try to explain that having a lot of Keywords and a low budget is actually harmful to the Keywords that could work at that budget.  Ask yourself right now how many Keywords you have in your Account that are just "using up" valuable daily budget when you have others that could use it to convert into sales.
So what should you do to add new Keywords?
There's no magic solution, unfortunately:  Being aware that you'll probably need to adjust your budget is half the battle won, the other half is mostly a matter of sensible judgement, use of the Traffic Estimator and Keyword Tool (soon to be married as the "Keyword Planner") and, as always, making sure you monitor performance closely after any changes.
So, if you've added a bunch of Keywords recently and have been scratching your head trying to work out why that meant your sales went down, take a look at your budget...

about Jon Gritton

AdWords Management Consultant, a Google Partner, based in Dorset, UK, but working worldwide... I'm very proud of having been a Top Contributor for AdWords since 2006 and enjoy being able to help others improve and develop their AdWords usage. I now work primarily as an AdWords Manager & Consultant. You can read my eBook "AdWords Preschool", just search on Amazon.

Adrian B
June 2013

Linking to this article is easier than explaining that with 5 euro per day you cannot buy the whole Internet. Good job Jon !

June 2013

Once that first keyword is held accountable to sales, and consistently achieves sales conversions at your target price (notwithstanding trends and seasonalities, and Conversion Optimiser can help with sufficient volume), you set the budget to unlimited with accelerated delivery and move on to the next keyword.


Further optimisations can be done to increase CTR and conversion rate on the first by:


- negatives

- ad copy testing

- sitelink and other ad extension testing

- landing page optimisations

- sales process optimisations like call handling, live chat, site search etc


Including more keywords before the account is profitable is what I term "Premature Scaling" Smiley Happy


Good article!

Adrian B
June 2013

Google should review their page about "Guides to success" from the help section. At the "Decide your budget" they recommend even a 5 $ daily budget, making new clients belive that is enough to get what ... 2 conversions per month from (10 clicks a day at 0.5 $ a click x 20 days = 200 clicks) ? Who can sustain a business from that ?



July 2013

so how to construct an campaign with how many ad goup and how many keyword in each group and budget is best group method. you can do it,man,tell me