Cracking the Mystery Behind Budget-Limited Impression Distribution
Over the course of my career I’ve learned that the vast majority of paid search accounts will at some point be affected by budget limitations. There are numerous reasons why budgets may become capped. You may need to temporarily pull-back spend to adhere to internal budgets. Maybe you add a new campaign to your account which leaves existing campaigns fighting for fixed resources. Or, an aggressive bid escalation strategy could make historical daily budgets insufficient. Whatever the reason might be, limited daily budgets affect most accounts at some point or another.
For most marketers, campaign level budget adjustments have become the go-to budget management strategy. You need to drop you spend by 25%? Sure, I’ll knock down your daily budget by 25%. Problem solved! It’s easy to understand why we’re so quick to change campaign budgets. It’s a simple, reliable method of controlling spend, and in an industry where time is at a premium, it’s a change that takes just a couple of seconds to implement. But do we really understand how we’re influencing performance when we change campaign budgets?
Interestingly, Google does not have much to say about the matter. They explain that when budgets are capped “ads in the campaign can still appear, but [they] might not appear as often as they could.” Talk about an exhaustive scientific conclusion! Unfortunately, we too often assume that this impression rotation is going to occur on a pro rata basis. In the past, I have aggressively dropped budgets with the expectation that I am going to see a linear drop-off in performance. For example, if I drop by budget by 50%, then I would expect my impressions, clicks and conversions to all drop by the same 50%. Click-through-rate and conversion rate shouldn’t be affected if Google is reducing my impression share at random and on a pro rata basis. Although this logic makes perfect sense, the data we’ve collected after limiting budgets has told a different story.
When we cap campaign budgets the more important question we should be asking is “which impressions am I limiting?” Let’s go back to our hypothetical budget cut. If we drop campaigns budgets by 50%, we said we would expect impressions to drop by 50%. Stop right there. While it’s true that a 50% reduction in budget will likely lead to a 50% drop in campaign level impressions, we need to stop and consider which impressions are going to be affected. The obvious first consideration is whether impressions will decline equally across the entire keyword set. But there are also less tangible and less measurable dynamics to consider. How will budget limitations impact the time of day my ads get served, the geography they get served in, and the devices on which my ads are showing? Google basically has free reign to decide where and how they are going to rotate our impressions.
Our experience has shown us that budget limitations (and even minor <15% limitations) can significantly impact the quality of our campaigns’ impressions. Our hypothesis is that when excessive impressions are available, Google will serve your ads across segments (times of day, geographies, devices, etc.) that offer the lowest competition. In other words, Google is not rotating impressions at random. It’s in Google’s best financial interest to take this approach as they’re now creating a bigger market (with higher bids) when and/or where there was previously less activity. Unfortunately, the lower competition segments are often less active because they relate to lower quality impressions that produce lower conversion rates.
So where’s the proof of this impression variability? Let’s look at three real-life data sets from our client base:
- Example One: One of our non-profit clients ran state-level campaigns across the nation. They did not have the budget to support this effort, but they wanted some visibility in every state. Most campaigns had impression shares (due to budget) limited by 25-40%. After explaining the risks of this strategy we were able to get the client to agree to experimentally increase our monthly budget so that we could run the campaigns with completely uncapped budgets. Very few changes (optimizations, testing, etc.) were made to the campaigns during this time, and the client is not significantly impacted by seasonality. Before and after results are shared below:
- Example 2: One of our B2B software clients was reluctant to significantly invest in a Branded advertising campaign. After a full year of running a campaign with a lost IS of 31%, the client decided to maximize branded spend. It is worth noting that 95% of the traffic and impressions from this campaign originated from the exact match iteration of its brand name. Again, very few changes were made to the campaigns during this time, and the client is not significantly impacted by seasonality. Before and after results are shared below:
- Example 3: Another one of our B2B software clients introduced several new campaigns related to an expanding product line. This required us to limit one of our existing campaign’s impressions by 15%. Once again, very few changes were made to the campaigns during this time, and the client is not significantly impacted by seasonality. Before and after results are shared below:
This data clearly suggests that there is an inverse relationship between lost impression share and impression quality and efficiency. It is critical that we consider the ramifications that campaign-level budget changes may have on performance. Before dropping budgets, dive deeper into your accounts and ‘cut-the-fat’ at the most granular level possible. Even better, when building out new accounts, consider how your campaign structure might influence budget management. Are there keywords that you will never want capped because they are exceptional performers? If there are, they should be broken out at the campaign level. Even if you didn’t structure your account like this when you launched, it’s not too late. Scan your account for your top performing keywords and consider moving those terms to a new “high priority” campaign that you can ensure receives sufficient daily budget.
All impressions are not created equal. Google has far too much autonomy in their impression rotation methodology to simply assume you can linearly scale performance up or down with budget. When facing budget limitations, take the time to cut unproductive spend by optimizing targeting settings and/or by pruning keywords. Break out top performers into separate uncapped campaigns. Campaign level budget reductions should be reserved as a last-resort optimization.