So many times in the past I have heard, “My budget is small and I must use it as efficiently as possible to reach as many users as I can; otherwise, I will be in trouble with my boss.” On the other hand, those with too large a budget, also afraid of their boss, spend the money recklessly.

I would like to divide the advertisement budget into two categories:

  • Ad publisher budget: “Where should I invest my next euro?”  “Should it go to Facebook or Google?” or “Should it be spent to place ads on Twitter or Snapchat?”
  • Campaign budget – After we decide which ad publisher will get our euros, we should then decide how the budget will be divided among our campaigns.

As I see it, although they directly affect marketing department efforts, these decisions should not be the responsibility of the marketing department but should be made by the finance team or the controller. This way we can ensure that the decisions will be driven by facts–not feelings–and that we will not be manipulated by the ad publisher. Obviously, setting ROI targets is necessary!

Ad publisher budget – Media Mix Modeling (MMM)

The biggest problem for everyone is how to divide the budget among the ad publishers. This has been an issue since the beginning of online marketing and continues to be a problem even today. Many models have been constructed to resolve the issue, but the problem is due to the fact that the marketers mistrust the algorithm that tells them what to do and the finance people do not want to miss an opportunity for growth.

Many companies have adopted the MMM model to solve this problem, but one part has been forgotten: companies have forgotten that they need to create trust between the marketers, who feel the ramifications of the investment decisions, and the finance people, who make the decisions. I have a very simple solution: allocate 15% of the budget for testing. Anyone who thinks he can improve on the model can use the budget to prove it. This budget can also be used for testing new ad partners.

To efficiently allocate your ad publisher budget, you simply need to know the cost and the conversion, which will allow you to calculate the added value of each of the players. If you wish to go one level deeper, you can individually consider each of the ad publishers, keeping in mind that your budget is limited to 500,000 a month. However, there is no reason to spend that much.

Campaign budget – Campaign budget allocation (CBA) model

I was told that solving this problem would be simple and that “since there is now a budget, set the campaigns into motion and make life and death decisions for your campaign.” Not enough budget can completely kill the ad campaign; however, a budget too large could lead to wasted effort. But dividing the budget equally amongst the campaigns does not work either.

To find an effective solution to this problem, we need to understand what we wish to accomplish by pursuing some of the campaigns. We also must differentiate between the campaigns that we are just learning about and the campaigns that are mature. The CBA should solve this problem for you.

When it comes to allocating part of the budget to a particular campaign, I would consider the following:

  • Campaign life – How long has the campaign been running? If it’s less than 14 days, I would not spend any money in case it doesn’t reach its full potential. I would allow it to develop and if it reaches its budget limit and the conversion rate is good, I would inject more money into it.
    If the campaign is mature, there are three factors to consider: the bidding, the conversions, and whether the campaign is under A/B testing.
  • Campaign bidding If the bidding campaign has only recently changed, i.e., within the past few days, I would not increase the budget.
  • Creatives change – If only a few of the goals within the campaign have changed, I would not worry about it; However, if all or a majority of them change, I would not touch the budget
  • A/B testing – if the campaign is being tested regularly, I would not change the budget, as this will contaminate the testing.

We note that we should still only allocate 15% of the budget for testing;  the remainder should be allocated to those campaigns with the best performance.

These are only a few of my ideas on how to divide the budget among the campaigns, but this set of rules can be automated so that all the details will be managed.

Overall, budgeting is not a subject for the marketing people, who complain they don’t have enough money. The job of the marketing team is to convince the company they are making a difference and deserve to receive a larger piece of the budget “pie.”.

Budget allocation it a cornerstone of performance marketing, but let’s face it: the budget is limited, and as such, the spending of each euro should be based on the performance of the ad partners and the campaign.

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