How to Estimate Your PPC Budget to Get the Best ROI

Pay-per-click (PPC) budget management isn’t the sexiest of topics, but it’s a crucial aspect of any marketer’s ad campaign. You can’t just dive into Google Ads and blindly bid — unless you want to see your precious budget go down the drain with little results.

But with some smart paid competitor research and regular check-ins on your PPC efforts, you can quickly begin understanding where to invest your PPC budget to gain the best ROI.

How to Estimate Your PPC Budget

There are a lot of different strategies out there for estimating daily budgets, but here are the top three most important steps to help you get a better sense of what you should be spending on ads in digital marketing:

1. Establish a goal

It’s always good to start any marketing campaign with a (realistic) goal in mind.

For example, you may set a goal to make $3,000 in profit each month from your PPC campaign.

Knowing what measurable outcome you’d like to shoot for can really help you figure out a realistic estimated budget and bidding strategy from the start.

You can then work backwards to figure out what’s required to hit your target goal. Take a look at your site analytic metrics, average order size, click-through rates (CTR), conversion rates, and cost of clicks (more on this below).

If you know that the average order size is $100, the conversion rate is 5%, and the average cost per click is $2, then for every 1,000 people that come to your site each month, 50 make a purchase. You made $5,000 in revenue but had to pay $2,000 for those clicks. Therefore, you made $3,000 in profits and attained your original goal! You now know you should allocate around $2,000 for your PPC budget.

2. Select keywords

Choosing the right keywords is vital when it comes to building a profitable PPC campaign.

You want to select keywords that are high intent for lead generation, otherwise you may just be driving users to your site that don’t actually intend on buying anything. And when you’re paying per click, this can squander your budget away — not a bright idea. Your goal is to reach potential customers.

Make sure you’ve got a good mix of short-tail and long-tail keywords. Short-tail keywords are more competitive but can bring in a lot of traffic. Long-tail keywords usually have much less traffic, but they’re low in competition and often have higher conversion rates.

Check out our in-depth guide on PPC keyword research to know exactly how to choose the perfect keywords for your PPC campaign.

Pro Tip: Try Similarweb keyword planner’s Last 7 Days Keyword Filter to stay ahead of the competition by giving you real-time keyword insights. And don’t stop there – get the tea on the best techniques for effective keyword research.

3. Run a competitor analysis

When it comes to smart PPC budget management, one of the best tricks to have up your sleeve is to simply check out what your competitors are doing.

There’s no need to make PPC budget estimates in the dark. Surely you have some competitors with established PPC campaigns — and you can use all their hard work to your advantage.

Competitor analysis will be a huge help for calculating your PPC marketing expenses as it gives you a clearer understanding of current market conditions.

You’ll want to research:

• How much your competitors spend on PPC ads
• What keywords they use
• What products/offerings they advertise

Armed with this knowledge, your business will be prepared to begin a successful PPC campaign.

But how do you find all this juicy information?

Well, you could hack into your competitors’ system…though we don’t recommend that. A much easier (and legal) solution is to take advantage of our competitive intelligence tools — which instantly reveal competitors’ estimated ad spends, budgets, how they deliver on paid search strategies, and a whole lot more for the world’s three biggest search engines (keep reading for more details shortly.)

How to establish campaign hierarchy in a PPC budget

Once you have an estimated advertising budget to work with, the next step is to divvy that budget up into different campaign

The number of campaigns will be different for every brand’s business goals and KPIs, but may include factors like:

• Different products you want to advertise
• Different services you want to offer
• Which platforms (search, display, shopping, etc.) you want to include
• Which locations to target
• Seasonal campaigns depending on time of year

Each campaign houses a specific set of keywords within their ad groups. It’s a good idea to segment your keywords into themed groups in order to better control exactly where your PPC budget goes.

Once you have these different segments of ad campaigns at your disposal, you can make informed decisions about campaign hierarchy. This simply means you need to decide which campaigns deserve the most budget and which can afford to receive a bit less funding to maximize your return on investment for your PPC advertising efforts.

The campaign at the top of your hierarchy should be the one with high-intent keywords that are most likely to drive people to make a purchase on your site, and thus best reach your target audience and bring the best ROI to your business.

Keeping your campaigns organized this way makes it a lot easier to gauge each campaign’s performance and make tweaks along the way to improve optimization, getting the most bang for your buck.

How to allocate test budget vs. ongoing budget

It’s also a good idea to allocate your budget between testing new ads and keywords out, versus your ongoing PPC campaigns that have been working well.

Allocating some resources — say, 15% or 20% of your overall PPC budget — to testing will help you get creative and try new strategies. Perhaps you can try targeting a different audience, or change up your ad copy with new keywords. You might be surprised at what you learn!

You can then move the successful ones over to your ongoing campaigns, drop the ones that don’t work, and move on.

With ongoing campaigns, you should always be optimizing and altering as you go. This will help your ROI continue to improve over time, as your strategies get better and better.

How Similarweb can help you build the best PPC budgets

Similarweb’s tools shine a light on exactly what your competitors are doing for their own PPC campaigns — taking out all the guesswork.

With our Paid Search Overview, you can instantly see a snapshot of how much other businesses in your niche are spending on their PPC campaigns, what their ads look like, what keywords they’re targeting, and more. This knowledge in tow, you’ll be much better informed on how to estimate and spend your ad budget.

Similarweb ensures you stay ahead of PPC trends and correctly target your ads. You can use our competitive analysis tools to uncover your competitors’ PPC strategies and which keywords they’re targeting. You can then make your own ad campaign with these keywords and rise above them in the SERP rankings — beating them at their own game.

Pro tip: Avoid a bidding war with your competitors and actually optimize your budget by discovering keywords that differentiate your brand from the competition by targeting untapped keyword gaps in your industry.

As your ad campaign strategies develop, you’ll need to adapt and reconfigure your tactics based on competitive insights, so having the right tool kit at your disposal is vital.

With Similarweb by your side, you can now plan your PPC campaigns knowing:

• Exactly when industry keywords are on trend
• What your average CPC is, helping you stay on budget
• Estimated search volumes you can generate
• Who’s the current traffic leader

Pro tip: While you’re planning your online advertising strategy, let Similarweb help you identify negative keywords, evaluate keyword seasonality, and align your PPC keywords to relevant search terms.

The light at the end of the funnel

Setting up a realistic PPC budget is key when it comes to achieving the best ROI. Still, be aware that although PPC has a reputation for bringing “immediate” results, this doesn’t necessarily mean you’ll be profitable right away. It can take some trial and error before it starts to pay for itself.

This is exactly why it’s crucial to know what you can afford to spend. But once it starts paying off, PPC ad campaigns can bring in impressive ROIs. It’s all about staying one step ahead of the competition and making improvements as you go — and with the right tools, this is a lot simpler than it seems.

by Sarah Mehlman

Sr. Marketing Intelligence Specialist

Sarah creates engaging content with over 5 years of experience. She enjoys traveling, family time, baking, and Netflix. Sarah holds a psychology degree from Clark University and lives in Israel.