In an attempt to make AdWords more “flexible,” Google just gave itself the ability to double your daily advertising budgets as they see fit…
Yep, that is a huge, shocking change and one that certainly caught most PPC professionals off guard.
What is Google’s justification, and how are advertisers reacting? More importantly, what does it all mean for you?
This guide covers everything you need to know about Google’s latest updates to the AdWords platform.
Google Introduces Flexible Budgets to AdWords
Google’s new policy went into effect on the same day it was announced, October 4, and opting out is not an option.
If you log in to your AdWords account at the moment you probably see this:
Yep… that’s Google forcing their new “flexible” daily budgets on all advertisers.
If you don’t accept it, at some point your ads will stop working.
Why on Earth Would They Do This?
The rationale behind the move was to better account for daily fluctuations in web traffic. In Google’s words, “If your ads don’t show up much because of low traffic, then we’ll make up for that by showing them more when traffic’s higher.”
Instead of trying to “spend” the same amount every day, Google spends more of your budget on high traffic days and less on low traffic days. Therefore, the “daily budget” is essentially a “daily average.”
Before the latest change, Google could already overspend by 20 percent of advertisers’ daily budgets.
As of now, campaigns that run throughout an entire month won’t be billed for more than the monthly charging limit, which is calculated by multiplying the daily budget by 30.4.
Unfortunately, the monthly charging limit only applies if your daily budget is consistent for the entire month.
Changing your daily budget, the campaign end date, the delivery mode or your time zone resets the monthly charging limit, so you could end up being charged for “over delivery.”
Campaigns shorter than a month are also subject to over delivery charges up to twice the amount of their daily budgets.
Google claims that such scenarios should be rare, but the announcement has nonetheless irritated many advertisers.
At it’s core, it is removing an element of control that all PPC managers want to have at their disposal. When you couple this with Google’s recent moves to “relax” just how exact their exact match targeting is, it’s hard not to be cynical and interpret this as Google simply pushing for even more of the almighty dollar.
Reactions From Advertisers
Initial feedback from the advertising community was overwhelmingly negative.
Ben Latham, Director of Digital Strategy at the online retailer Summit, summed up the collective ire in an editorial on the subject: “The latest move by Google could remove power and autonomy from advertisers.”
Considering that the change isn’t costing advertisers anything, and it could actually help advertisers better achieve their goals, why are people so worried?
Now that the daily budget has unofficially become a daily average, some advertisers are afraid that their monthly advertising budgets could get eaten up early in the month. If the first half of the month is full of high traffic days, does that mean their ads won’t be shown in the second half of the month?
The answer is theoretically yes, but in such a scenario, Google claims that the advertiser would have already met their goal.
In other words, their ads would be reaching the same number of people just at different times of the month.
While this all sounds logical, what does that mean for advertisers who want a consistent stream of leads over the entire month? It’s easy to understand why advertisers feel like Google is usurping their autonomy.
How the AdWords Changes Could Impact Advertisers
While many advertisers will be unaffected by the change, others may need to adjust their campaigns.
For example, smaller companies that receive more sales leads than they can handle may depend on their daily budget to cap the number of incoming leads.
Now that campaigns can generate up to twice the number of intended sales leads in a given day, such companies might want to consider lowering their daily budgets, but don’t bother making alterations until you’re sure they are necessary.
AdWords campaigns that aren’t limited by daily budgets will not be impacted by the latest policy change.
Lingering Questions About Google AdWords
In response to the public backlash, Google has attempted to clear up the confusion and controversy by issuing an FAQ document.
In it, Google assures advertisers that they don’t have to worry about blowing their entire budget before the month ends.
“Our algorithm continues to make sure your ads are delivered throughout the month by taking into account your past spending within the billing cycle,” Google explains.
Likewise, if a campaign is under the monthly charging limit near the month’s end, Google will increase ad delivery to meet the monthly target.
What about shorter campaigns with a set end date or other situations where the monthly charging limit might not apply?
It appears that advertisers could theoretically be on the hook for twice the amount of their daily budget; however, Google claims that the algorithm isn’t optimized to go over budget, but rather to maintain a consistent average.
Does this all mean that advertisers should start cutting their daily budgets in half?
For now, it shouldn’t be much of an issue since AdWords was already overspending by up to 20 percent of your daily budget.
According to Google, campaigns that haven’t seen overspending in the past shouldn’t expect to experience it now.
Nonetheless, advertisers should pay special attention to how these changes affect impressions, clicks and conversions to make sure that their campaigns are having the intended effects.