There’s been a recent change to the functionality of Google AdWords daily budgets that will affect the accuracy of budget control capabilities going forward for pay per-click (PPC) campaigns (SEM for our North American friends) and Display campaigns on the Google Display Network (GDN).
In the past, daily budgets could overspend on any given day by a small percentage, but now Google has authorized itself to spend up to twice the average daily budget. It’s called “over delivery”. According to the documentation, the spend should balance out at the end of a 30-day billing cycle and if it doesn’t, Google will issue a credit.
On a positive note
This change allows campaign budgets to adapt automatically and capture demand that fluctuates with the day of week, seasonality, or a sudden increase in demand resulting from promotions in other channels. So, if you have a programme where demand is much higher on a Monday, this new budget flexibility will adapt to capture that traffic. Or if a new TV spot causes branded demand to spike on a given day, the over delivery would continue to serve ads beyond the daily budget and avoid lost opportunity.
Here’s the kicker
Budgets/budget groups are ineligible for the credit if any changes are made to the budget within the calendar month or if a campaign runs for less than 30 days. So, if you have a promotional budget that lasts a week, we have no way of respecting a strict budget allocation.
One idea we discussed is to create a promo account for brands that like to push short term promotions. While this gives us better control of the budget for the duration of the promotion or offer, it does bring up some complications. If we’re to use the same keywords across multiple accounts, it is very likely the keywords in the promo account will have a higher CPC cost per-click due to a lack of history and potentially a lower ad rank.
If a client wants to modify spend in the middle of a calendar month, that may do more harm than good as we’d be waiving eligibility for an adjustment credit. Budget allocations will be less precise than they used to be as we now need to live with a standard deviation of up to 100%.
Some of the problems that could arise
We adjust daily budgets on a regular basis to ensure appropriate budget pacing for the month. Though we have never been able to budget to 100% accuracy in a single day (Google has always allowed for +/- on daily budget caps) it used to be restricted to a minimal percentage overage. Going forward, this practice will not only be ineffective in achieving the desired outcome but would also make us ineligible for the adjustment credit.
While the total spend can be controlled by the monthly budget order, this change can lead to the target budget being met prior to month end. Despite protecting the account from over spending, it can mean there’s no activity for part of the month.
If this isn’t bad enough to contend with, larger brands can sometimes have multiple AdWords accounts and as such don’t always use the account budget order as the brands require flexibility as to where the budgets are spent. Some types of businesses that could be affected by this are those with locations and/or franchise businesses. In these instances, we need to be able to support each business unit/franchise owner evenly or support under performers. Budget could be spent by locations/campaigns with greater volume, meaning the smaller locations may not get the exposure they need.
The issue of “over delivery” is a problem. Over delivery means capturing demand through impressions, clicks and spend. What if we have already learnt that the daily budget set is the max we can spend before hitting the point of diminishing returns? Most advertisers will experience this. There will be a maximum level of performance before you see CPAs (cost per action) increase and ROI diminish. This will place a greater emphasis on the attribution analysis to justify this increased spend and traffic. I.e. what revenue is this increased traffic generating or assisting?
To protect performance, you must be using smart bidding to ensure Google keeps within your target. If you’re using manual bidding your account will be at risk of over spending without generating the conversions needed.
How do we adapt?
Your paid media team should be keeping a close eye on the situation and will likely have to change the way they manage budget pacing. In certain cases, you may need to set lower daily budgets to compensate for this change. In other cases, you may need to accept minor under pacing or over pacing during the month and resist the urge to course-correct for fear of becoming ineligible for the adjustment credit.
Accounts with an open-ended budget orders will now need to have an account budget applied purely for protection from over spending.
Google’s view of the world is that whether you generate 10,000 clicks over 30 days or 20 days, the result is the same. No doubt, Google expects brands to be too reliant on AdWords to reduce their daily budgets, and once the budget is met it expects brands will allocate additional budget rather than suffer downtime for part of the month. Of course, this is our cynical opinion.
Some examples of impact:
- A two week promo campaign may spend two-times the budget with no possibility of adjustment credit
- Accounts with complicated budget allocations may see certain regions/segments spending more than usual
- Accounts may stop serving ads days or weeks before the completion of an share of wallet (SOW) period due to over delivery
- Mid-month budget change requests may result in considerable overspending