Knowledge Base

Why Does AdWords Spend More Than My Daily Budget?

If you have questions about your AdWords spend, don’t worry – you’re not alone. This is actually a common question in the digital marketing community. Google quietly rolled out an update on how budgets function in AdWords on October 4. This update is actually just a more aggressive approach to an already imperfect system.

Budget Basics: Over Delivery

In the past when entering a daily budget for a marketing campaign Google would convert that daily budget into a monthly budget by multiplying it by 30.4 (average # of days in a month). This would give Google an impression of how much money these campaigns should spend in one month. Now that Google understands a monthly limit, the algorithm will allow for up to 20% over the daily budget of any campaign. This is referred to as overdelivery and it’s designed to maximize traffic for the advertiser and profit for Google.

What’s New For AdWords Spend?

Google decided that 20% wasn’t accounting for enough of the traffic that was being missed in accounts, so they raised that limit to 100% over the daily budget in order to compensate. This means that if you’re in a competitive market and your budget is $500 per day, Google is willing to spend up to $1,000 on any given day.

The Problem

The premise was simple and innocent enough; however the system is not perfect. The first set of issues arise when there are small business owners who aren’t planning their advertising budgets monthly. It’s common for advertisers to test the validity of Google AdWords before determining a monthly budget, but this algorithm undermines the limit that the user sets. Google’s solution to all issues is an over delivery credit in the event the account accrues a cost higher than the budget it calculated for the month. Google applies these credits back to the accounts automatically and that is sufficient for some. For advertisers that alter their budgets multiple times within a month, this can be problematic because the equation will get more complicated with each change.

The Solution

In my experience, these changes are rarely reverted; therefore, the question is how do we protect ourselves or our clients? The best thing that can be done for launching is determining a monthly budget for the marketing campaigns in question. If you have questions about how to determine a marketing budget, feel free to reach out to our team for support.

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