budget for a keyword, multiply the average value of a conversion by the average number of con-
versions in a given day. To find the monthly budget, multiply the daily budget by the number of
days in the month. The whole equation should look something like this: (The numbers used here
are for example purposes and have no corresponding metrics.)
Average Number of Conversions
= 15 (clicks per day)
.08 (% conversion rate) = 1.2 (conversions
Daily Keyword Budget
= $5 (average conversion value)
1.2 (conversions per day) = $6 (daily
Monthly Keyword Budget
= $6 (daily budget)
30 (days in the month) = $180 (monthly budget)
One more thing about these equations: The budget illustrated would be your absolute maximum
budget because spending that amount would equate to spending all of the profits that you’re mak-
ing with your PPC campaign. Obviously, you won’t want to do that. Breaking even is not the point
of PPC advertising. Making a profit is. Therefore, it would be more realistic to expect to spend about
$3–$5 a day on that one keyword. That would make your keyword budget in a 30-day month
$90–$150 each month.
A Different Kind of Auction
s we talk about auctions and bidding on keywords, you may be tempted to think of that end
table you bought down at the Auction Barn last Tuesday. But there are big differences. Although
you say you’re bidding on the keyword, what you’re actually bidding on is the placement of an
advertisement containing the keyword. And there are numerous placements, numerous times per
day, and probably millions of searches in which the ad could theoretically be displayed.
So, let’s say your maximum bid is $1 on a keyword of your choice. This means that every time your
advertisement is shown, you can be charged up to $1. Now if someone else comes along and bids
higher than you, that person’s ad will be shown in a more optimal place than yours.
Because it’s possible that you’re being charged $1 every time your ad is shown, your advertising
budget could be inflated to a sizable bill within 24 hours if your ad were shown every time the key-
word you’re bidding on was shown. So to keep the advertising budget manageable, you can put a
cap on your budget for each keyword.
If your budget for that keyword is $25 a month, and the word stays at the $1 level (it can drop below
that at any time, depending on what your competition’s highest bid is), your ad can be shown 25 times
a month. But the price of words (or the ads in which they appear) is dynamic, going up and down as
other ad owners increase or decrease their bids. If the price drops below $1, this increases the number
of times your ad can be shown, and any amount over that $1 bid decreases the times it will be shown.
We’ll get into this in a little more detail as we discuss bid management and such practices as bid
Managing Keyword and PPC Campaigns
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