Why you shouldnt use Google budgets

Controlling budgets on Facebook is easy. You pick a number, and Facebook works out how best to spend (almost) exactly that number across a single day.

Google, however, has 1 more factor to consider, which means this is a flawed way to set budgets – search demand.

What is search demand?

Search demand is the volume of users that are searching on Google for a particular term in a given time period. 

Take the term “lateral flow test” as an example. 2 years ago no one was searching on Google for this. But, for some reason, people began searching a lot more in 2020.

It is these changes, large or small, that add an additional, and significant, element into Google budgeting.

Why does search demand matter?

Google search and shopping ads only show to users if they search for your selected keywords (or variations of them), so if there is no search demand, you don’t show ads. 

This means if you have your largest budget of the year in the month with the lowest search demand, you’re likely going to underspend. 

The only option you’re left with is to top up your spend by bidding on less qualified keywords and lower quality traffic, in order to spend your budget. I do not recommend this.

Search demand is a marketers best friend, and worst enemy.

This mechanism is a bit of a double edged sword, because whilst there will inevitably be periods of low demand, there will also be periods of high demand (i.e. Black Friday).

Similar to the scenario with low demand, there will be months when demand is through the roof, and you don’t have enough budget to capture all of the users ready to purchase your product. All that revenue you could have had, left on the table for a competitor to steal, and no guarantees that next month, or the month after, will see remotely similar demand.

Let users control your budgets.

This sounds like a crazy statement, but hear me out.

It’s impossible to predict exact days when demand will increase or decrease, as there are so many micro and macro factors at play. You might have a good idea of some weeks or months, but almost certainly not all.

Given that we know demand through the platform is not consistent day to day or month to month, flexibility is needed to get the most out of it.

Instead, uncap your budgets (to a level that you feel comfortable with), and let your automated bid strategy control when to spend. By uncap, I just mean minimise the chance of your budget limiting spend. Budgets don’t need to be excessive, you can potentially start with a daily budget 20% higher than your highest daily spend in the last 12 months.

An example of how this might play out if you have a ROAS target of 200% and an uncapped budget:

> Search demand spikes on a given few days so more traffic, and potentially sales, are available.
> As long as ROAS remains around 200%, the bid strategy will try to bid more aggressively, enter more auctions and spend more to get more sales.
> If ROAS drops below 200%, even following an initial increase in bids, the bid strategy will be more cautious, lowering bids and the number of auctions it enters, spending less.
> The main caveat to how the bid strategy works here is that it depends on how other advertisers in those auctions react. If they also increase their bids, you potentially won’t spend more, as the cost of entering into further auctions will still be too expensive.

This approach will mean your spend levels will be more variable and flexible, and will adjust to capture the most demand and sales regardless of when they are.
It might make budgeting with your finance team a bit more tricky, but no one will mind if you’re generating more sales as a result.

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