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The calendar year is filled with milestones for a Paid Search marketer. From gift-giving holidays to college enrollment deadlines, we all mark our respective calendars with dates and time frames to remember year after year.
An undeniably vital time for each and every single one of us is the deadline for Next Year’s Budget.
Because this is such an important topic and I’d hate to generalize, let’s start with the heaviest topic first: Year over year growth.
Chances are that you know how your account(s) performed last year. You were either there yourself, or you at least have access to that data through your ad platform. Either way, this will be the basis for our recommendations.
Additionally, you’ll want to use the growth in approved budget that you experienced leading into this past year. If you received at 15% bump in budgets from 2014 to 2015, you know that asking for a 45% boost might be a bit alarming. Whatever change in budgets you saw last year should be a clue to the changes you want to anticipate for the coming year.
What additional factors play into this?
Your final recommendations may vary depending on the recipient. Some clients or bosses like a simple and straightforward number. One final number. Others like to understand the breakdown of each month’s potential. Still more managers would prefer to understand where they lost out last year – how being more aggressive might grow revenue or sales.
Even if your client or manager doesn’t need all of these budget options, it’s likely you’ll benefit from at least considering them.
The example we’ll cover addresses the three of these to some degree. Let’s start with the breakdown of our 2015 budget.
We saw massive growth in our budget last year. We also experienced a heightened expectation for our revenue goals. Although increases are common, a 26% lift in annual budget and 30% year over year hike in ROAS isn’t exactly “usual.” If your manager is requesting a general ballpark for 2016 spend, look to the bigger industry growth.
Forrester Research offers annual estimates for the growth in digital marketing. The most recent release projects figures into 2019, based on the past years’ performance.
Between 2015 and 2016, search-marketing saw a 10.6% lift in expected ad spend. This estimate is down from 13.3% from the 2014 to 2015 transition. From Forrester’s estimates, you can also see that display is expected to have a 17.8% boost in spend for 2016, down from 19.6% growth in 2015. And lastly, social media spending is expected to continue to increase by 20.4% for 2016.
The long story short (well, not too short, I guess) is that overall expectations for PPC budget are lower than last year. Yes, we anticipate growth, but perhaps not as much as what we saw last year.
For this quick-and-dirty calculation, I should recommend that my 2016 budget increase to $1,365,666.17. This represents the expectation of 15% industry growth. Straightforward ballpark figures, right?
Let’s move into the more detailed budgeting estimates from here. Let’s say we agree with the 15% year over year increase but need to distribute it over the course of 12 months. For this, we begin to look at actual budget usage.
In the example above, we showed that certain months used more or less budget when reaching our ROAS goals. But at the end of the month, could we have done more? Were we limited by budget? Or perhaps we were limited by our ROAS goals. While we might have come up short on the profit margin, we could have potentially brought in higher overall revenue if our ROAS goals were shaved down a pinch.
In this table, we can see that there were months where we reached, met or exceeded certain goals. At times, the cost was just about on budget, but revenue was well beyond the mark (ex. March 2015). In this case, additional budget would have allowed us to increase our revenue while slowly reducing ROAS to the goal.
Another note about our 2015 budget is that there were months where we underspent, but barely reached the revenue goal for the month. In these cases, it’s likely we can adjust spend from the low month to another month, such as the March example, where we know there is more opportunity awaiting.
In the monthly recommendations, we adjusted our budgets based on these factors.
Depending on how aggressively you want to approach your recommendations, you might give all budgets a lift, with the more successful months receiving an even greater boost. You might also pull back on the revenue goal if you can make up for it in other months. The key is identifying your overall outcome and ensuring you can meet those checkpoints throughout the year.
In practice, you might have a final breakdown that resembles this:
To further support your plans, utilize the data you have in front of you. One of the easiest tools to access is Google Trends. This tool can inform you of your brand’s or product’s awareness year over year.
Some products have relatively stagnant growth while others see continued upticks in awareness and online searches:
Additional data that can come in handy is your overall impression share. If you’re seeing repeated loss due to budgets, or loss due to rankings with capped budgets, the data is telling to you open up your spend.
Leveraging this type of loss with months where revenue goals have been reached (and exceeded) will further support the request for additional budget for your paid search initiatives.
There are many other factors one might use to project the best budgets for your 2016 PPC year, but one of the most important pieces to your puzzle is answering the right questions. What are your opportunities? Where have you seen your best growth and your worst losses? By working with fluctuations, you can not only argue for your best budgeting levels yet but also achieve your goals most effectively.
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