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What Happens When Your PPC Budget is Cut in Half?

January 11, 2010

It’s the moment any marketer dreads; budget cuts.

This happened a lot to me last year, and I know I’m not the only one. 2009 was a truly horrible year for a lot of folk. But this story does have a silver lining, thanks to the proof in numbers that search marketing can provide.

So getting back to the story; what exactly happened when half of my PPC budget was taken away?

Month 1 – Continue running campaigns as before, at the reduced budget
The first month was the “control” month (aka the “oh shit” month). Nothing was changed in terms of campaigns, adgroups and keywords that were running. The only change was the amount that was spent. This is what happened:

  • Clicks through to the web site: Down 53%
  • Key actions indicating an intent to purchase: Down 25%
  • Online conversions: Down 46%
  • Revenue lost (est): 9.5x more than the budget cut

Month 2 – Use the reduced budget to fund top keywords only
To be fair, if your salary was cut in half, you wouldn’t continue to splurge on things. You would take a look at your expenses, downsize, and cut out certain luxuries to try and live within your means.

So in the second month, I focused campaigns back down to basics. The budget was used to fund only the top-performing keywords – those which drove the most traffic and highest quality. As a result, many longtail words went unfunded. This is what happened:

  • Clicks through to the web site: Down 61%
  • Key actions indicating an intent to purchase: Down 12%
  • Online conversions: Down 25%
  • Revenue lost (est.): 5.3x more than the budget cut

Month 2 showed some interesting results. When comparing the different approaches it seems that you drive less volume (clicks) when you limit yourself to “head” keywords (this makes sense as you are casting a much smaller net), but as a result you drive better quality results compared to just spreading the budget thinly (as in Month 1).

As a side note, I believe that the Month 2 approach is not a sustainable long-term solution for the reasons highlighted in a previous post: Understanding the Importance of Assist Keywords.

So comparing the two months, Month 2 was better than Month 1. However, that’s not to say that it was good in its own right – especially when the result was still 5x less revenue than the budget that was cut (and we’re talking big numbers here).

Month 3 – I got my budget back, plus a bit more
After two months, I was fighting the budget bearers off with sticks. Looking back I like to see this exercise as more of an experiment, even if it was a forced one.

The results proved a point and served as a reminder of how kick-ass search marketing can be when it comes to metrics and accountability. So if you find yourself in this situation, make sure you keep on top of the numbers, and share it with the people who hold the purse strings.

From → Search Marketing

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