PPC Budget Forecasting 101

As pay-per-click (PPC) professionals, we're often asked to play with our numbers, to shift our budgets, and essentially to predict the future. A daunting task, I know. Some common questions we get from our clients about our search accounts cover the following:

Could you spend an extra $20,000 this month? What would that look like?How many clicks or conversions are we leaving on the table with our current budget?Are we maximizing our impression share?What's the potential that we could spend without impacting our CPA?

Surprisingly, I've learned that many advertisers don't have a quick and efficient way to answer these questions. They get caught up on which data sets they should pull, which campaigns are performing best, what their tipping point is, their average positions, etc.

Instead of spending a ton of time thinking about the details, I'm going to walk you through the simplest form of budget forecasting, dubbed "Budget Forecasting 101."

In this example, we'll pretend that our client is an online-only electronics store, called LightningElectronics.com. Their products are considered "luxury" and come with a significant price tag.

Our current CPA from our search account over the last month is about $39 per purchase (or conversion, which typically ranges from a $3,000 to $10,000 sale). We have limited budget for our current campaigns, and have spent $2,300 in the last 30 days.

It's 9 a.m. Monday morning, at the start of a new month. The client sends an email:

Hey John,

Great job on all the PPC work you've been doing! I've talked with my manager and we're open to spending a bit more this month. So, I have a few questions for you:

Do you think you can spend an extra $3,000?If so, what would that look like?How many more conversions can you get and at what CPA?Looking forward to hearing back by tomorrow afternoon.

Thanks

Ted
LightningElectronics.com

Now, don't flinch! You've got more than enough time to create a rough forecast that will help answer these questions.

To do this, we'll take a really simple route and recalculate your search account's potential using "Lost Impression Share." Essentially, we're going to ask ourselves, "What is possible if we had 100 percent impression share for all of our active campaigns?"

Step 1: Login into AdWords

Navigate to your "Campaigns" tabs, add in the "Impression Share" and "Lost Impression Share (budget)" columns. Then, download the last 30 days of your data (or even 14 days if you feel you've made significant changes recently).

Step 2: Organize Your Data

Open your data spreadsheet in Excel, ensure you're looking at live campaigns, and line up your columns so that they look like the screenshot below (delete anything that's unnecessary). Keep in mind that I've changed some titles (i.e., "Conversions" was "Converted Clicks" and "CPA" was "Converted Clicks/Cost").