How much should we spend on search advertising?

Many new search engine advertisers ask: “What sort of money should we be spending on this?”. We explain that there’s no optimal figure: you’re just buying clicks, so you can spend whatever you want. The more you spend, the more you get. Yes, there’s an eventual limit (where you’re showing for every search, and always as the first advertiser), but this is usually way beyond the budgets of most advertisers in industrial B2B sectors.

If there’s not enough money to appear for every search as the first advertiser, where should the savings be made? It’s usually better to bid lower and appear in a lower position in the ads than to miss out on searches completely. For example, let’s say there are 200 searches a day on a term (‘keyword’); top advert position costs £2.50 per click and gets a 5% clickthrough rate, while third position costs £2 and gets a 2.5% rate. If you have a daily budget of £10 and bid £2.50 for that top position, you’ll appear for 80 of those 200 searches, and get 4 clicks, but then your money runs out. If you bid £1 for that third position, you’ll appear for all 200 searches, and get 5 clicks.

However, £10 a day means spending £300 a month …on just one keyword. Most advertisers want to cover dozens of keywords, while still only spending a few hundred pounds a month on the whole exercise. It doesn’t add up. So coverage has to suffer, as well as position on the page. If you want to spend £1000 a month, that’s £33 a day. Divide that over just a couple of dozen keywords, and you’re allocating under £2 per keyword, per day. That might not even be enough for 1 click. If the ad is on target and can get a 5% clickthrough rate, it means you can show no more than 20 times a day for each keyword – probably less – before the money runs out. If your keyword gets searched for several hundred times a day, it’s not surprising that you rarely see your own ad.

PPC search advertising is great value for money, but it’s important to be realistic about how thinly you may be spreading things.