Is Google Managing Your AdWords Budget?

Posted on Tuesday, July 6th, 2010 by Print This Post Print This Post

Categories - Featured, SEM

Those actively involved in bid management are aware of Google’s official policies on campaign budget.  In response to the question, “Why am I being charged for more than my daily budget on some days?  Google explains that AdWords “may allow up to 20% more clicks in one day than your daily budget specifies…” and although you’ll  “never be charged more than your daily budget…” there are other factors that may to the lead to the inevitable byproduct of bid management — overspend.

First, let’s define overspend as the additional cost incurred that exceeded a campaign’s set budget.

Now how does overspend occur?

Well, we had to dig a little deeper and used Google’s policy as a reference.  For starters…”If Google over-delivers your ads too much, and you accrue more costs in a billing period than your budget allows, a credit will automatically be applied to your account.” And “Over the course of a single day, you may change your daily budget for each campaign in your account a maximum of ten times.

What’s not clearly defined above is which budget is being measured for overspend? Daily Campaign Budget? or Total Monthly Budget across all Campaigns?

Additionally “…if you change your budget halfway through the day, you’ll typically spend 50% of your old budget in the day’s first half and 50% of your new budget in the day’s second half…Please note that if demand for your ad is greatest early on the day you make a budget change, AdWords might deliver (for instance) 70% of your first budget in the morning, and then 50% of your second daily budget in the afternoon…if you change your daily budget multiple times in a given day, AdWords will serve your ads based on the highest daily budget amount you chose for that day.” In other words, per Google’s increments and referencing the table below, if your Original Budget was set at $10,000 at Midnight (when AdWords billing begins) but then adjusted to a budget of $8,000 at noon of that day (commencing the second half of the day) you would incur a 10% ($1,000) surplus of the Original Budget which falls in line with Google’s  20% more clicks disclaimer.  However, this overspend jumps to a 38% ($3,000) surplus when compared to the adjusted “new” budget that was edited at noon:

Budget Potential Spend % Amount Spent
Original Budget 12:00am $10,000 70% $7,000
Adjusted Budget 12:00pm $8,000 50% $4,000
Total $11,000
% of Overspend vs. Original Budget 10%
% of Overspend vs. Adjusted Budget 38%

What is more troubling is that the “70%” (per Google) isn’t a hard number and is simply referred to as an example, therefore what if this number was 85%?  See below for an example of how a fluctuating interval can introduce spend above the stated 20% allowance:

Budget Potential Spend % Amount Spent
Original Budget 11:59pm $10,000 85% $ 8,500
Adjusted Budget 12:00pm $8,000 50% $ 4,000
Total $ 12,500
% of Overspend vs. Original Budget 25%
% of Overspend vs. Adjusted Budget 56%

This can present challenges when trying to optimize CPC/Bid management, especially if the amount used to make suggestions is the newly inputted daily budget (i.e. the number you see within Google MCC at the end of the day or the next day).  Therefore it may be of value to document what/when budget changes are being made to your campaigns when considering making Bid changes.

Lastly, and arguably most important, Google’s policy suggests that if budget changes are made, they must be of a value higher than the last highest budget for the day.  Simply put, although you can make multiple budget changes daily, (up to 10 max) ads will be served based on the highest budget entered on that particular day.  Therefore, if you have clients or your own campaigns that are budget sensitive, and you anticipate having to make adjustments, it might serve you well to start off the day conservatively.

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