PPC

AdWords Changes Daily Budget Caps, Much to Advertisers' Dismay

Google AdWords very quietly announced a change to their daily budget caps on Wednesday, October 4 that we suspect will have significant ramifications for advertisers. The official statement is that “campaigns will be able to spend up to twice the average daily budget to help you reach your advertising goals, like clicks and conversions.” This is a significant change from Google’s prior campaign budget functionality, which served ads each day until the budget cap was reached and would never exceed a campaign’s daily budget by more than 20%.

Our Google teams have elaborated on this with an additional statement: “Due to the fluctuating nature of Search and other auction channels, a regular feature request was the need for a mechanism to capture spikes and seasonality to drive stronger results”.  They also clarified how this loosening of daily budget cap adherence still aims to target a monthly total, noting “As a result, we are relaxing overdelivery rules. Overdelivery will still honour the monthly limit of 30.4 times the daily budget to be spent in a billing cycle. There will be no impact to Campaign Total Budgets (AdWords video campaigns only) behavior as a result of this update."

The change has already begun rolling out to AdWords accounts, and will be applied to all advertisers by October 18. Here’s an example of how this would work, assuming a daily budget of $100, running for 4 days.

Day1

Day2

Day3

Day4

Total

Max Budget Potential*

$30

$30

$1,000

$1,000

Daily Cap/Client’s Target Spend

$100

$100

$100

$100

$400

Actual Spend (Before Change - 1.2x)

$30

$30

$120

$120

$300

Actual Spend (After Change - 2.0x)

$30

$30

$200

$140

$400

*Maximum Budget Potential is the total amount of available spend for the day based on the campaign’s inventory and targeting settings 

From our perspective, this creates significant risk for advertisers to spend their monthly budgets much earlier than expected, or to spend more than planned as they update daily budgets throughout the month, clouding Google’s assumptive derivation of the month’s total budget. It will require much more diligent management of the campaigns in order to flight budgets appropriately, and frankly, it’s a significant step back in the layers of control we have for campaign management.

What’s Still Unclear

Unfortunately, this change was rolled out very quietly without supplemental information to answer advertisers’ questions and concerns. Several things remain unclear, including:

  1. What KPI Google is using to monitor how/when to allow budgets to spend over the daily limit and how advertisers can control these.
  2. What happens to campaigns when budget caps are changed daily (this is particularly pertinent for retailers as we head into Holiday and are in need of specific daily flighting to hit sales targets).
  3. How this tool interacts with 3rd party management platforms (Kenshoo, DoubleClick Search, Adobe Media Optimizer, etc) that have tools to optimize programs by adjusting daily budget caps.

Next Steps

The iProspect Paid Search team will be closely monitoring the impact of the new daily budget functionality across all accounts and campaigns on a daily basis to ensure we adhere to current spend strategies for each client. Depending on the severity of the impact to planned budgeting flighting for holiday,  advertisers may need to take additional measures, such as monthly (or even weekly) insertion orders, reduction in CPC maximums, or even campaign restructures. The iProspect team will follow up with additional details and recommendations as our tests reveal trends and as Google provides more guidance and insight.