While shared budgets have a long history, it’s essential to understand whether they constrain your potential returns. Explore this guide to uncover the most suitable scenarios for utilizing shared budgets.
Throughout my 18+ years in search marketing, one constant has been the prevalence of shared budgets.
When I inquire about the rationale behind this approach, the response is consistently familiar: “We operate with a fixed budget, and this is our preferred method for financing all our initiatives.”
This explanation spans many businesses, from small mom-and-pop operations and SMBs to prominent holding company ad agencies and Fortune 100 enterprise brands.
In truth, there are instances where this approach performs well. Still, there are also situations where you unintentionally hinder your progress by using shared budgets, ultimately limiting your potential return.
The Scenario
Indeed, a shared budget, often referred to as a portfolio budget, serves as a valuable tool for resource-constrained teams (which, practically speaking, encompasses nearly every marketing team globally). It prevents excessive spending on a single advertising platform. However, it’s important to note that a shared budget prioritizes high-volume or high-demand components. It’s akin to the rush for Taylor Swift tickets – those who act swiftly and possess significant resources secure their tickets while others miss out.
The Consequence
The situation might seem innocuous until you consider the scenario where a low-conversion-rate campaign generates a substantial traffic volume and shares a budget with a low-traffic but high-conversion-rate campaign.
In this case, the underperforming yet high-traffic campaign will consume a disproportionately large portion of the budget daily. This situation could reduce the opportunity or the amount of time the high-performing campaign can be displayed, which becomes evident when examining metrics such as Impression Share and Impression Lost to Budget.
This phenomenon is commonly known as budget cannibalization, where one entity within the shared budget allocation absorbs an excessive portion of the total budget allocation, leaving less for other entities with which it shares the funds. Consequently, this diminishes the collective performance (evaluated as a whole due to the shared budget) of the campaigns involved in the budget-sharing arrangement.
To offer an alternative analogy: It’s akin to asserting that all New York NFL teams are mediocre at best, solely because the Jets haven’t made the playoffs since 2010, even though the Bills and Giants secured playoff spots in 2022.
While they all share a connection through their NFL affiliation, the performance of one entity can discourage overall confidence, as it can drag down the reputation of the others.
The Aftermath
If you’ve absorbed the information provided earlier, this should be clear-cut, but let’s sum it up neatly:
Treating two campaigns as equals and instructing them to divide a budget evenly may have resulted in missed opportunities for traffic and conversions.
The Solution
It’s important to acknowledge that every operation is unique. Some may not encounter this scenario, while others, particularly smaller agencies, and bandwidth-constrained brands, are more likely to do so.
I favor a specific approach: implementing standalone daily budget caps for individual campaigns. Note that I emphasized “daily.” If the campaign is ongoing or evergreen, it’s best not to use a total budget; it can become cumbersome later—reserve campaign total budgets for shorter campaign flights with predefined end dates.
From this point, I manage budgets manually to maintain flexibility between campaigns. This entails shifting funds manually between campaigns. If one campaign outperforms another and accommodates a higher budget, I make the necessary adjustments. We base these budget migration decisions on manual tracking of spend pacing, a method I prefer, though there are various ways to accomplish it. I like to do this daily to stay nimble, but you should determine the correct interval for your team.
Finally, we evaluate campaigns by comparing the ones that meet or surpass our objectives versus those that fall short.
When Are Shared Budgets Appropriate?
Determining the appropriateness of shared budgets can be subjective, but they make sense in some situations.
One common scenario is when you’ve divided your campaigns by devices (for example, Campaign 1 is exclusively for mobile, while Campaign 2 is solely for desktop). The keywords, assets, and targeting may be identical in these cases, but you have a valid reason to keep the campaigns separate. Allowing these campaigns to share a budget can be acceptable.
However, it’s crucial to closely monitor performance because mobile traffic often dominates and may lead to campaign cannibalization on the desktop side. This was less of a concern in the past when mobile cost per click (CPCs) were significantly lower than desktop, but nowadays, mobile accounts for 55%-65% of total traffic.
Shared budgets can also be suitable when multiple campaigns share the same assets and targeting but are segmented by match type at the campaign level – a practice that, believe it or not, is still quite common.
A shared budget can function effectively and mimic a situation where match types are segmented within a single campaign but at the ad group level.
However, it’s essential to exercise vigilance, especially when monitoring broad matches, as it often significantly drives search volume.
Another suitable scenario for shared budgets arises when employing a portfolio bid strategy. When a cluster of campaigns shares a common objective, and there isn’t a disproportionate variation in volume demands among them, utilizing a shared bid strategy makes sense.
Using a shared budget aligns with all elements, working cohesively toward a shared goal, resembling a Performance Max approach with various ad units.
The Key Message
First, it’s important to note that shared budgets don’t apply to all campaigns. For instance, campaigns in experiments or utilizing Performance Max strategies do not qualify for their use.
If you are currently employing shared budgets and are contemplating opting out of them after reading this informative article, I recommend conducting a thorough analysis beforehand.
In campaigns utilizing a shared budget, consider the following factors:
- Is one campaign significantly outperforming another in terms of returns?
- Is one campaign consuming an excessive share of the budget, even though it’s not the top performer among those sharing it?
- Do you have the capacity to manage and oversee individual campaign budgets? Always factor in the cost of manpower when conducting return analysis.
- Does the budget align with the shared approach if you’re using a portfolio bid strategy?
After evaluating these aspects and determining that transitioning from shared to individual budgets could be beneficial, go ahead and conduct a test.
However, remember that while you may witness improvements in your target campaign, there’s a potential risk of adversely impacting other campaigns that previously shared the budget.
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Best of luck with your search marketing endeavors!
