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Struggling to determine what it will cost to run a successful paid media campaign? Setting a Google Ads budget or Meta Ads budget can be a daunting task, especially for businesses new to digital advertising. However, establishing the right minimum spend is crucial for achieving meaningful results and maximizing your return on investment.
Before diving into building a smarter paid media budget, it's crucial to establish clear benchmarks and goals for your business. This foundational step will guide paid media budget size decisions, ensuring your investments align with your overall marketing strategy.
Start by defining the specific metrics that matter most to your business. Some essential KPIs for paid media include:
Selecting the right KPIs for your business will help you ensure that you and your team are aligned on how you plan to measure the success of your campaigns and make data-driven decisions to develop a proper advertising budget for your business size. These goals or benchmarks should correlate with your profit margins and lifetime value of a customer. A more exhaustive list of KPIs to keep track of can be found here.
With your KPIs in mind, establish clear, achievable goals for your paid advertising efforts. These goals should be specific, measurable, and time-bound. When launching paid media campaigns for the first time it's important to set a conversion volume goal as well as goals for specific KPIs. For example, you might aim to see a 3.0 return on ad spend within the first three months and drive a total of 50 conversions per month.
To build a paid media budget that's competitive and effective, research industry benchmarks for your chosen platforms. CPCs, CTR and other KPIs can vary significantly by industry, so it's essential to find benchmarks specific to your sector.
Establishing a Google ads budget requires careful planning and consideration of various factors. Here's how you can create an effective budget strategy:
Determine your estimated Cost Per Acquisition (CPA) to work backwards—depending on the campaign type Google requires anywhere between 15 - 50 conversions per month to be considered working effectively and out of "learning". If your estimated or goal CPA is $50, you should at minimum plan to spend $750 per month on that campaign. Each campaign type requires a different conversion volume range:
The formula above is the primary step in determining your budget, however it's important when looking at budget for multiple campaigns to take advantage of Google's Keyword Planner which will allow you to estimate keyword traffic. This will help you determine what keyword themes drive the most traffic volume with the lowest competition to understand where more of your total budget should be allocated.
When it comes to building a meta ads budget, it's essential to start with a solid foundation. Meta Ads, which include Facebook and Instagram ads, offer flexible budget options, allowing you to set daily or lifetime budgets based on your marketing goals. To determine the right minimum budget, consider factors such as your KPI goals and conversion volume goals.
When starting with Meta ads, it's crucial to allocate enough resources to give the algorithm sufficient data. Within Meta each ad set or campaign (depending which level you set the budget on) requires at least 50 conversion events to exit what is called the "learning" phase and switch to "active" and ensuring you have enough budget to fund the algorithm properly is what should determine your budget.
In order to back into a budget using a similar cost per acquisition formula for Meta works—for small businesses you want to estimate to have enough budget to get a minimum of 5 conversions per day per campaign or ad set, for businesses with a little more flexibility in budget the ideal number of conversion per day per campaign or ad set is 10. If your estimated CPA is $10 then you'd need to have a budget of $50 per day which comes to $1,500 per month.
The budget structure of Meta Ads can be set either on the campaign level or the ad set level—it's important to choose the right option here to best optimize the budget that you set. If you are launching a campaign with multiple ad sets with large variations in audience sizes it is best to set the budget at the ad set level to ensure that you can shift budget around based on performance rather than allow Meta to determine where your budget is spent. If you leave budget on the campaign level in this same scenario Meta will funnel the majority of the budget to the largest audience despite performance down funnel. A campaign level budget is ideal when audience sizes are relatively similar.
To maximize your Google ads budget and Meta ads budget, it's crucial to take a strategic, cross-platform approach. Continuously refining your strategy to focus on the highest-impact opportunities at every stage of the customer journey is key. This means regularly analyzing performance data and reallocating funds to the most effective channels and campaigns.
Embracing automation tools can significantly enhance your paid media efforts. Meta's Advantage+ Shopping Campaigns and Google's Performance Max utilize machine learning to optimize audience targeting, bidding, and ad placements. These tools can help stretch your budget further by improving efficiency and reducing manual workload.
Rather than spreading your budget thin across multiple channels, prioritize high-performing media that your target audience frequently consumes. This approach ensures that your paid media efforts are concentrated where they're most likely to yield results.
Keep in mind that patience and persistence are key – Rome wasn't built in a day, and neither are successful ad campaigns. Regularly review your performance metrics, adjust your strategy as needed, and be prepared to scale your budget as you see positive results. With a solid foundation and a data-driven approach, you'll be well on your way to building a winning paid media strategy that drives growth for your business.
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