Q: I’m running paid media for an in-house brand and am looking for help with my paid search campaigns. Thanks to good performance, I got some additional budget from management, but when I increased the budgets for my campaigns, my ROAS got worse. Why?

This could be a symptom of many different conditions. Here are some of the most common diagnoses: 

Over Saturation

One of the golden rules of paid media is the cost vs. efficiency tradeoff. The basic concept here is that the more you spend, the less efficient your CPA or ROAS will become. If the campaign was already effectively reaching most of its target audience, increasing the budget might lead to diminishing returns. This can happen if the ads start reaching less relevant segments of the audience or if the frequency becomes too high, causing ad fatigue.

Although your ROAS/CPA may not be as good as it was before raising your budgets, you should still see an increase in conversion volume. It’s up to you to determine the minimum ROAS or maximum CPA you’re willing to hit to gain that additional conversion volume. You can also try expanding your keyword or audience targeting to reach different types of potential customers.

Bid Strategy and Competition

Increasing the budget may have altered how your bids compete in the auction environment, especially if using automated bid strategies. This can inadvertently raise your cost-per-click (CPC) without necessarily improving the quality of the traffic, as the system may bid more aggressively to use up the increased budget. Try tightening your efficiency target to mitigate this.

Quality of Ad Creative and Landing Page

If the increase in budget wasn't accompanied by a review and optimization of the ad creatives and landing pages, the additional traffic might not be well-served. Ensuring that ads and the user experience on the landing page are optimized is crucial for converting increased traffic into actual results.

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