How Your AdWords Budget Affects AdWords Best Practices
Pay-Per-Click marketing best practices have a crucial omission – the advice is highly circumstantial!
What I mean by this is that a PPC marketer should not manage a $2 Million / month AdWords account the same way as a $2000-per-month budget. While technically, the same best practices apply to accounts both large and small, the larger advertiser in this example has 1000x more at stake (or alternatively, the smaller advertiser has 1000x less at stake), and so the degree to which an advertiser should adhere to AdWords account optimization best practices varies greatly.
Failure to recognize this important detail can result in one of two potential problems:
- A smaller advertiser can end up spending way too much time and resources on PPC management expenses (for example, agency fees or the cost of hiring someone to manage the PPC account in-house) on trying to adhere to AdWords best practices which may offer large upside in terms of % improvement in account metrics, but result in a negative ROI when taking into consideration the overall media + management fees.
- A larger advertiser might waste millions of dollars a month due to lack of resources dedicated to managing and optimizing the account, resulting in a poorly managed account.
When it comes to AdWords best practices, there are an unlimited number of tasks you could potentially do, for example:
- Try out new keywords or delete poorly performing keywords
- Test out out new ad copy or landing pages
- Create new campaigns and/or ad groups
- Tweak your keyword bids or campaign budgets
- Do negative keyword research
- Try out different ad extensions, etc.
- (Repeat forever).
Any honest search marketer is going to try to follow AdWords best practices to the best of their abilities, but how much work is enough? Is it when an objective is reached, for example, a target CPA? But even then, how do you know if you should have worked harder to hit an even more aggressive target CPA?
As you’re evaluating the progress of your PPC campaigns, I think it’s important to think about how your account stacks-up with other AdWords advertisers with a similar amount of dollars at stake as you, rather than the global universe of Google AdWords accounts which can range in spend from anywhere between $1 to millions per month.
This is something that hasn’t been possible to do until now.
The Value of Peer Comparisons in AdWords
When conducting general PPC analysis it’s always important to try to compare like data to make sure you’re getting meaningful insights into your pay-per-click campaigns.
The AdWords Performance Grader from WordStream was designed to take exactly these kinds of differences into account, and I think it’s instructive to think about why the AdWords Grader’s score system was developed the way it was, as you can apply the same logic and methodology to various areas of your account and your personal PPC education process.
The basic premise of the AdWords Grader is to grade tiers of similar AdWords spend across graded accounts to give context to the application of best practices within your campaigns. For example, if you spend an average of $7,000 / month on AdWords, you’ll be compared with other advertisers with between $5,000-$10,000 / month in monthly AdWords spend.
Rather than saying you have fewer ad variations than all of the accounts graded by WordStream, or you have fewer keywords than X% of all AdWords accounts, the AdWords Grader is looking at how your account fares as compared to similar accounts – accounts of a like size and scale. Your $500/mo. Local business client isn’t being compared to how well GEICO is managing their paid search account – you’re being compared to other accounts with similar dollars at stake.
How Does Peer Comparison Impact Specific PPC Evaluations?
Let’s take a look at how this plays out with a specific performance indicator that WordStream’s grader is evaluating: ad text optimization.
Google’s Best Practice is to write ads that are aligned to the keywords in your ad group. Obviously, if all the keywords in your account are being matched to just a single ad text, you’re not doing a great job. Having 2 ads is better than 1, and having 3 is better than 2, and so-on. But how much is enough? Likewise we know that doing A/B testing of different ads within an ad group is important, but how many ads should we have per Ad Group?
Ad text optimization is perhaps one of the best examples of the power of this kind of segmentation. Comparing a large e-commerce vendor advertising thousands of products to a small business doing lead generation and spending a few thousand a month is highly misleading, because optimizing ad text with that frequency for the smaller fish is totally illogical and probably a waste of resources that would be better devoted elsewhere. Rather, you should aim to optimize at a rate that’s more frequent than accounts of similar size and shape.
In the above illustration, an advertiser spending roughly $7k / month has around 150 ads in their account, versus other similar accounts have nearly twice as many ads. That sounds about right. If you’re spending roughly $84k / year on AdWords, 150 ads seems a bit underweight. And this is validated by the peer comparison.
This same approach is leveraged in other AdWords metrics evaluated by the AdWords Grader, such as Click Through Rate, Quality Score, Landing Pages, Account Activity, Use of Negative Keywords etc. Relative account comparison (something that hasn’t been possible until now) provides a powerful means of generating more valuable insights from your paid search campaigns in general: adding context to the data you’re analyzing can make the numbers significantly more meaningful.
You can find out more about how different components of your campaigns stack up with similar sized accounts by trying the free AdWords Performance Grader.
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