POV

Google Announces Changes to AdWords Daily Budget Caps

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Background

Last month, Google took another step towards bringing their machine learning and Artificial Intelligence capabilities to the forefront of campaign management in AdWords. The search giant announced that daily campaign budgets are now capable of spending up to twice what they’re set to spend. The concept of overdelivery isn’t a new one — Google previously allowed spend to exceed daily caps by 20%. However, now it is creating more leeway for its machine learning to make adjustments in order to maximize spend to reach advertising goals such as clicks and conversions, and also to prevent capping during high times of traffic.

Google leverages real-time auction data to algorithmically flight campaign budgets throughout a given month. If there is typically less demand for a particular advertiser on weekends, for instance, AdWords could adjust for that either by spending more in advance or in higher-demand periods in the following week.

What We Know

As with other evolutionary changes to the AdWords platform or ad units (such as Enhanced Campaigns), Google is not allowing an opt-out of this feature, which means that advertisers have to adopt to the new standard, and it will impact certain advertisers more than others.

It is worth noting that a sample set of internal data shows that spending over campaign budget caps in Google has been relatively limited thus far, with less than 20% of campaigns seeing instances of overspending, and that when overspending does occur, it averaged 13% over the daily cap. We’re also seeing that nearly 80% of the overspend has come from campaigns marked with the “Limited by Budget” status in AdWords – a key signifier for where this may occur. So, while specific campaigns may spend up to +100% of their caps, on the whole, the variance we have observed so far has been much less drastic.

Here are some key details on the update:

  1. For campaigns that run continuously throughout the month with no daily budget changes, advertisers will not be charged more than the “monthly budget limit” (daily budget * 30.4 days). If spend does exceed the monthly budget limit, advertisers are credited.
  2. There are four things that will trigger the monthly budget limit to reset:
    1. Changing daily budgets for campaigns that run all month
    2. Changing a campaign end date
    3. Changing ad delivery method
    4. Changing an account’s time zone
  1. If a budget is changed, the spend for the rest of the month won’t exceed the new average daily budget multiplied by the number of remaining days in the month.
  2. Overdelivery currently occurs when there’s volume opportunity. Campaigns with Impression Share lost to budget are most likely to be affected by overspend. Google hasn’t confirmed whether conversions will be a signal for advertisers using AdWords Conversion Tracking.
  3. If you experience an overspend and try to correct it the next day, take note of when new budgets take effect: The campaign could have spent up to your new daily target in the morning hours alone, which may force advertisers to be dark the second half of the day. Consider when budget changes are being made when reacting to the previous day’s spend.
  4. Monthly insertion orders will still serve as the true monthly spend cap. In theory, IOs should always match the monthly aggregate of all daily budets, whether you set your daily campaign budgets once or update them throughout the month. If you have yearly IOs, a monthly budget limit is still calculated. Assuming there are regular budget changes throughout the month, though, the limit keeps resetting, meaning that the actual spend could start to vary from what was planned, and with no IO to catch it.
  5. There are AdWords Scripts to help control overdelivery, which you can find an example of here.

Resolution POV:

While this change reflects a larger reliance on Google’s machine learning to optimize campaign performance, this announcement also took effect with no advance notice. Since launch, this update has understandably left advertisers unsure of its potential impact on pacing and investment. While each advertiser has unique processes and considerations for its budget pacing in AdWords, the most important step to take at this point is to closely monitor overall spend levels as well as specific campaigns that are likely to experience overdelivery. Determine whether a shift in pacing strategy is advisable based on how Google’s new policies are impacting your account. Moreover, consider things like how your intended engine allocations could change, or the compounded effect of many small overdeliveries throughout a month.

Summary

Google’s emphasis on automation is growing, and an impact on bidding, budgeting, campaign formats and much more is clear. While automation comes with less direct control, the promise of optimization based on dozens of near-auction time factors makes the inclusion of machine learning one that cannot be ignored by advertisers. Resolution will continue to integrate this change along with other machine learning capabilities, while maintaining a close watch on its impacts, and continuing to advocate for increased visibility into strategic views of the actions being taken, and insight into what factors drove those changes.