Overspend and You: Why Your AdWords Spend Goes Over Budget

By Jacob Fairclough | @RealSecretJake | Senior Account Analyst at Hanapin Marketing

We’ve all seen our daily campaign budgets seemingly ignored by the AdWords system. It is usually not too big of a deal, just a few dollars here or there. Once upon a time I believed this probably happened because the system didn’t react in time to a series of clicks and ended up pausing the campaign after the budget was passed. “Oh well, at least it was close” is what I told myself.

On the other hand budgets may occasionally go over by a decent margin. If your CPC’s are more than a few dollars you quickly take notice. If you are on a strict budget and trying to stretch it evenly across the month, this can drastically hamper you pacing plans. It’s frustrating to set a budget to control spend, only to end up spending over the budget anyways.

The even bigger deal is despite losing your money; JG Wentworth can’t help you get it back now, or ever for that matter. You are on your own. Now that you blood pressure is rising, I’m here to let you know that there is actually a formal system in place for overspend. Once you learn how it works you can stop worrying and make peace with the system.

 

Daily Budget Limits

Daily budgets let you control spend by campaign, channeling your budget as needed amongst your account. When you start seeing this daily budget go over regularly you may wonder what is actually going on in your account. The good news is, these fluctuations are perfectly normal.

On higher traffic days, Google will keep showing ads up to 20% extra of your daily budget. The idea behind this is to keep traffic flowing on the good days, assuming they will lead to increased conversions. It’s not perfect but it’s easy to see why Google does it. If they can give you a little bit extra boost on specific days, you may take the increased performance as a reason to spend even more and increase your budgets.

This system also has the benefit of pushing traffic on busier days, which often balance out with the slower days. I’ve often found this usually works out in my favor eventually bringing the account in around the allotted budget at the end of the month, while still grabbing a little extra traffic when it is available.

So what happens after that extra 20% is spent? Well, you’ve hit a hard cap. Your ads will stop showing from this point until the next day begins. In the event that the system continues to deliver ads past this point, Google will not charge you for these clicks. Think of it as a present for you (ignoring that you are already over budget by 20%).

 

Monthly Budget Limits

What happens if your campaigns go over by 20% every single day? That would start to add up quickly and cause extra stress that you don’t need. Thankfully, the same principle from above applies to the amount you are charged on a monthly basis as well.

AdWords caps your monthly charges at a specific monthly limit. The monthly limit is calculated by your average daily budget multiplied by the average days in a month, 30.4.  If this cost is exceeded you’ll only be charged the monthly limit rather than the actual total ad spend.

There are exceptions to this policy though. If you change your budgets throughout the month, the monthly charge limit will no longer apply. Otherwise you could try to game the system by running super low budgets for a few days in a month to pull the average down.

For better or worse that means many of us will be spending the last few days of each month performing the end of month budgeting dance. We’ll push and pull to get the most conversions while coming as close to the budget as possible.

This isn’t the worst thing in the world though. If it weren’t for this, I wouldn’t have the memory of once finishing $0.08 under the account’s monthly budget, possibly the closest to thing to perfection I will ever see. I don’t know what that says about the my profession or myself, but at least I have something going for me.

Have you had issues with overspend? Its definitely frustrating, especially on smaller budget capped accounts. How did you address it and did you find any helpful workarounds or strategies?