Google dropped the daily budget recommendation for Demand Gen campaigns from $100 a day (or 20 times your target cost per acquisition) down to 10 times your target CPA. The change happened this month. It matters because until now, Demand Gen has been too expensive for most local businesses to test.
If your target cost per lead is $30, you can now run Demand Gen at $300 a day instead of $600. If your target is $50, you’re looking at $500 instead of $1,000. That is still not cheap, but it is half what it was a fortnight ago.
This is not a sale. It is Google admitting the entry price was too high and lowering the threshold so smaller advertisers can compete. Here is what to do with it.
What Demand Gen actually does
Demand Gen is Google’s campaign type that runs on YouTube, Discover, and Gmail. Display campaigns are being phased out later this year, and those ads will move into Demand Gen.
You are not targeting someone who just searched for your service. You are showing up in front of people while they watch videos, scroll feeds, or check email. It is awareness and consideration work, not bottom-of-funnel conversion work. You are introducing yourself to people who do not know you exist yet.
That means the leads take longer to convert, and your attribution gets messy. But if you are sick of bidding against everyone else for the same ten keywords in your town, this is the alternative.
If you are sick of bidding against everyone else for the same ten keywords in your town, this is the alternative.
The new budget floor still assumes you have budget
The lower budget gives smaller advertisers who skipped Demand Gen in the past a chance to compete in the auction. But let’s be honest about what "smaller" means here. If you are spending $30 a day total on Google Ads, you cannot afford Demand Gen yet.
Ten times your target CPA is the minimum Google thinks it needs to train the algorithm properly. Go lower and the campaign struggles to learn. You will burn money without enough data to optimise.
If you are spending $500 to $1,000 a day across Search and Performance Max and you have been wondering whether to test Demand Gen, this change makes it possible. If your total daily budget is under $300, put this on the list for later and keep your money in Search.
What to do this week if you want to test it
Run it for a month before you judge it. Demand Gen is not like Search, where you know in three days if it is working. The value shows up in delayed conversions and brand search lift, not immediate clicks.
If your current Google Ads budget is under $5,000 a month, I would still prioritise Performance Max and Search. But if you are already maxed out on high intent traffic and you need another channel, this price drop makes Demand Gen worth testing for the first time.
Prompted by Two Octobers.