Shared budgets have a history of existence, yet do they inadvertently hinder your potential for higher returns? Discover the ideal scenarios for their utilization in this comprehensive guide.

The Scenario

Shared budgets, often called portfolio budgets, undeniably assist resource-constrained operations (which essentially encompass every marketing team worldwide) by preventing excessive spending on a single platform. Nevertheless, shared budgets tend to prioritize high-volume or high-demand components. It’s akin to vying for Taylor Swift tickets—those who act swiftly with substantial resources secure the tickets while others miss out.

The Consequence

The situation may appear harmless at first, but it becomes apparent when you have a low-conversion-rate campaign generating significant traffic, sharing a budget with a low-traffic but high-conversion-rate campaign. Consequently, the underperforming yet high-traffic campaign consumes a disproportionate portion of the budget daily. This scenario could reduce the opportunities or duration for the high-performing campaign to display effectively, as observed in metrics like Impression Share and Impression Lost to Budget.

This phenomenon is commonly termed budget cannibalization.

It occurs when one entity within a shared budget framework consumes an inequitable share of the allocated budget to the detriment of the other entities sharing the funds. This, in turn, leads to an overall reduction in performance (which is evaluated collectively due to the shared budget) for all campaigns involved. To illustrate this differently, it’s akin to asserting that all New York NFL teams perform poorly because the Jets haven’t reached the playoffs since 2010, even though both the Bills and Giants successfully entered the playoffs in 2022. While they share an NFL affiliation, the underperformance of one entity casts an undeserved shadow on the others.

The Consequences

If you’ve absorbed the information provided above, this should be pretty clear, but let’s summarize it neatly:

You treated two campaigns equally and instructed them to split the budget evenly. As a result, this led to missed opportunities for both traffic and conversions.

The Solution

It’s essential to acknowledge that every operation is unique, and not all will encounter this situation. However, it’s more frequently observed in smaller agencies and brands that need more resources.

My personal preference, which I implement whenever possible, is establishing individual campaign budget caps daily. Please note that I specifically mention “daily.” If the campaign is ongoing or long-term, using a campaign total can become cumbersome later on. Reserve the campaign total approach for short campaign durations with predetermined end dates.

Subsequently, I manually manage budget allocations between campaigns, allowing for flexibility. If one campaign performs exceptionally well and can accommodate a higher budget, I manually make the necessary adjustments.

We determine budget shifts through manual monitoring (my preferred method, although various approaches exist). I prefer to do this daily as it keeps us agile, but the appropriate frequency depends on your team’s needs.

Next, we assess campaigns by comparing those meeting or surpassing our objectives with those falling short of the set targets.

When Are Shared Budgets Suitable?

The appropriateness of shared budgets can be subjective, but there are scenarios in which they can be justified.

One of the more prevalent scenarios is when you’ve organized your campaigns by devices, such as Campaign 1 being exclusively mobile and Campaign 2 for desktop. In this case, the keywords, assets, and targeting are presumed to remain consistent, but there’s a valid reason for segmenting the campaigns. Therefore, having these campaigns share a budget can be acceptable.

However, monitoring performance closely is crucial because mobile often accounts for the majority of traffic and could potentially lead to campaign cannibalization on the desktop side. This was less of a concern in the past when mobile cost per click (CPCs) were considerably lower than desktop, but now mobile traffic typically constitutes 55% to 65% of the total.

Shared budgets can also make sense when multiple campaigns utilize the same assets and targeting but are differentiated by match type at the campaign level—an approach that, surprisingly, is still common practice.

A shared budget functions effectively, and in principle, it mirrors the scenario of splitting match types within a single campaign, albeit at the ad group level.

The only caveat is that you must keep a vigilant eye on broad matches, often driving a substantial portion of search volume.

Another situation where shared budgets are suitable is when employing a portfolio bid strategy. If a group of campaigns shares a common objective, and there isn’t an imbalanced demand in terms of volume among them, they can be incorporated into a shared bid strategy.

This is a scenario where utilizing a shared budget makes sense, as all components collaborate towards a unified goal (similar to a Performance Max approach with distinct ad units).

Key Insights

First and foremost, it’s worth noting that shared budgets are only suitable for some campaigns (e.g., campaigns involved in experiments or those utilizing Performance Max strategies are not eligible to use them).

If you currently employ shared budgets, it’s essential to undertake a careful analysis before rushing to opt out of them after reading this informative article.

For campaigns utilizing shared budgets, consider the following:

1. Is one campaign significantly outperforming another in terms of return on investment?
2. Is one campaign consuming a disproportionate share of the budget, especially if it’s not the top performer among those sharing it?
3. Do you have the capacity to manage and sustain individual campaign budgets effectively? Always factor in the manpower cost when analyzing returns.
4. If you’re employing a portfolio bid strategy, is the budget also shared among the campaigns within the portfolio?

If you’ve conducted this analysis and determined that transitioning from shared to individual budgets would be beneficial, then go ahead and test it out. However, remember that while you may witness improvements in your target campaign, there’s a potential risk of adversely impacting the other campaigns that previously shared the budget.

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