Google Adwords Budget Update

Last week, AdWords informed advertisers that a change had already happened to the way budgets get handled on a daily basis.  Historically, Google has taken it upon itself to exceed your campaign budget by 20% in order for the advertisers to maximise performance. The difference now is that that 20% has changed to 100%.

Google says: “To help you hit your advertising goals, your campaigns can now spend up to twice your average daily budget.”

Sounds pretty scary, doesn’t it? But don’t panic, Google have stated, as was the case before the update, an advertiser will not be charged more than your average monthly charging limit: the average number of days in a month (30.4), multiplied by your average daily budget. They have also stated they will credit back over deliveries based on that monthly figure.

The Implications

When you think about it, the update makes sense in a way that it could help with daily seasonality and fluctuations in demand. Imagine you have hundreds of campaigns and on a busy day most of them are capped by budget; this is where the update will allow the campaigns to go over the limit, and potentially meet demand, hopefully bringing in more conversions.

If by some chance there’s an over-delivery (spending more than your monthly budget), Google will credit the overdelivery cost back to you. Adwords offer a new ‘overdelivery’ reporting option.

There is a catch…

google adwords budgets

What happens when advertisers adjust their daily budgets or pause campaigns at any point(s) during the month? The calculation is reset the same way it has been in the past.

This is the catch. All of us will have to pay attention particularly to how Google will interpret the new monthly budget based on any daily budget changes. In this case, advertisers could end up paying for the delivery because the monthly limits don’t apply. Here’s the example:

One day you set your budget to be £30, the next day you set it to £40 and on the third day £50. You would expect that you would pay £120 when in fact with this new update you could end up paying as much as £240 because the daily budgets might double. However, Google have said this is highly unlikely to happen, but if you have short term campaigns, e.g. for a promotion, you must be even more vigilant with budget management.

You may think that setting your budgets to half of what you were planning to in the first place will solve the problem but you never know how your campaigns might behave. As mentioned above, these “overspends” will happen only when the traffic coming to your campaign is at a high level and Google thinks it’s “good” for your business to exceed it. With halving your budget, you could end up losing out on key, high quality traffic.

The other important thing to bear in mind, is that you cannot opt out of this update, and it’s in place now!

So what do we recommend?

  • Be diligent with your budget management, don’t rely too heavily on daily campaign budget caps.
  • Have a comprehensive budget tracker or health check in place, which you monitor frequently.
  • Keep a closer eye on budgets when you have promotions or offers on, particularly when the budget is not set to run for the entirety of a month.
  • Take extra caution in February – only 28 days in the month – 2.4 less days than the average month!

What does this mean for the future?

Could this be the beginning of the end for the advertisers longtime spend safeguard, the daily campaign budget? Could Adwords switch to monthly budgets for campaigns? Only time will tell…