Google AdWords 2x Budget Over-Delivery Explained
Earlier this month, Google made a sudden announcement that AdWords can over-deliver up to twice your daily budget on any given day. Not only was this unexpected but the changes came into effect on the very same day, 4th October 2017.
If you are responsible for managing the PPC in your company then maybe you have seen your daily spend suddenly jump up over the last few weeks?
Or, if you are an agency, maybe you have had clients asking you why they are spending significantly higher than the daily budgets that they authorised for you?
Let’s take a deeper look into what is happening.
PREVIOUSLY – 20% OVER-DELIVERY
Spending more than your specified daily budget is nothing new in AdWords. Previously you could spend up to 20% over the daily budget on high traffic days and Google would try to balance this out on other low traffic days. This is called over-delivery.
So, for example, you set a daily budget cap of £1000 per day. Google can spend up to £1200 on any given day.
Google will try to make up for this by underspending on other days so that you do not spend more than your monthly charging limit of £30,400 (£1000 x 30.4 days)
“Your monthly charging limit is the average number of days in a month (30.4) multiplied by your average daily budget.”
If at the end of the month, your total spend is over £30,400 then Google will give you an over-delivery credit for the amount that went over.
This has always been a reasonably easy conversation to have with clients. They seemed to understand and accept the reasoning behind it without need for a lot of justification.
NOW – 100% OVER-DELIVERY – 2X YOUR DAILY BUDGET
So, you set a daily budget cap of £1000 per day. AdWords can spend up to £2000 on any given day.
Google will still try to make up for this by underspending on other days and will still give you an over-delivery credit if the accrued costs go over £30,400 in a month.
This change was so sudden that Google hasn’t been able to update it across the AdWords Help Centre yet.
SPEND MORE THAN 2X YOUR DAILY BUDGET?
So, you set a daily budget cap of £1000 per day. You know that AdWords can spend up to £2000 on any given day.
Is it possible to spend over £2000 per day? Well, actually, the answer is YES.
However, if you accumulate over £2000 in costs on any given day, you will only be charged £2000. So, if you set a daily budget of £1000 and you accrue £2300 of costs, you will only be charged £2000.
It is worth noting that this is also returned to you in the form of an over-delivery credit (rather than changing the campaign statistics) to avoid corrupting the performance data that we use for optimisation.
SO WHAT’S THE PROBLEM?
Some people might be asking why this is a problem because they end up spending the same amount across the month anyway. But do you really? The scenarios below might shed more light on this.
Google says that this change can benefit advertisers because on higher search volume days we can get more traffic. But is this really helping us?
Yes, it is possible that on a good day, having the extra exposure can amplify the good performance by allowing more traffic that results in more leads/sales.
But, what if we are having a bad day? It can also amplify poor performance by spending more and not getting the leads/sales.
Before the change, the impact of over-delivery was less. Now, the effect is much bigger.
Here are some scenarios that might apply to you or your clients:
What if there is a technical problem on the website that isn’t noticed immediately?
If the online checkout or lead submission form breaks down then we wouldn’t want AdWords to serve double the daily budget on that day.
What if you have a set budget for a flash sale on a specific day?
Your client tells you that she has authorisation to spend an extra £500 for a flash sale today on top of the normal £500 daily budget. You increase your daily budget to £1000 but you end up spending £2000. Try explaining that one the next morning.
What if you only run AdWords on weekdays and not weekends?
Let’s say that you have £1000 per day for 22 working days of the month so while you are expecting to spend a maximum of £22,000, you could end up spending up to £30,400 as your monthly charge limit is calculated as £1000 x 30.4.
What if you run a campaign that does not run on for a full month?
Let’s say you have £5000 to run a 10-day campaign so set a daily budget of £500. If Google over-delivers and you spend up to £10,000 then Google will still hold you liable for those charges because you are still under your monthly charging limit of £15,200 (£500 x 30.4).
What if your company works on weekly budgets or irregular budget periods?
One of our clients in the travel sector has custom pre-defined periods that align with their seasonality trends. They have specific budgets assigned to each period, however, the period dates do not match Google’s billing months so over-delivery could misalign these.
What if you have a limited capacity to the number of leads you can handle at any given time?
One of our clients is a mortgage broker firm who increases or decreases the daily budget depending on how many leads they require. This is now taken out of their control and could send them more leads than they can handle.
Let’s say you have a monthly budget of £30,000 and sales tend to be stronger at the end of the month around pay day.
You might decide to have a reduced daily budget of £750 per day for the first 15 days of the month then an increased budget of £1250 for the last 15 days.
If the over-delivery doubles the daily spend to £1500 during the first 15 days then you will be left with only £500 per day for the remainder of the month.
This may be an extreme example but it emphasises the point that over-delivering early in the month would have the opposite effect of what we are trying to achieve in this situation.
Setting a daily budget cap allows us to mitigate risk so that if I spend £1000 today and don’t get many leads/sales then I can start again tomorrow with the same amount. If Google over-delivers up to £2000 then I have less budget available for the other days that might perform better.
Not only do we lose some of our control but we also do not know exactly what it is based on. All Google tells us is that, “AdWords will continue to optimize your spend based on daily fluctuations in traffic, what you’ve spent on previous days of the month, and other factors”.
Unfortunately, there is no setting to opt out of over-delivery.
However, some of our clients will be unaffected because they have unlimited budgets (as long as performance metrics are met). This means that the daily budgets are set so high that they are never reached. The spend is controlled by increasing or decreasing bid aggression based on CPA or ROI performance. This strategy is ideal but cannot be accommodated by all.
We will be monitoring our accounts even more closely now to see whether this change has a positive or negative effect on each of our clients. It is unlikely that all of our campaigns will improve and just as unlikely that all of our campaigns will decline. Some might perform better but we must react quickly to the ones that do not.
Written by William Cheng PPC Director at Circus PPC Agency