AKA, How to Keep Google from Turning Your $500 Budget into $600 in Spend
Take a look around any Google help forum and you’ll likely see questions about how AdWords budgeting works. They usually come from advertisers who’ve run over their monthly ad budgets for lack of understanding of this topic. I have to admit, I was one of those advertisers.
I would have felt a lot of embarrassment about my past mistakes if not for the fact the Google help experts had to do some double-checking of their own on it—that’s how (intentionally?) confusing this topic is.
Most, if not all, advertisers use monthly budgets. Of course, AdWords runs on daily budgets. The way you work within this environment depends on whether or not your campaign runs every day of the month.
With full confidence intact, let’s review how budgeting works, especially when you’re using ad scheduling.
The Way Your AdWords Budget Works For Campaigns That Run Every Day
The most straightforward rule to remember is this, both for campaigns that run every day or that use ad scheduling: Whatever number you put in as your daily budget, multiply it by 30.4 to determine the maximum amount you’ll be charged that month. Google uses a fixed 30.4 days for every month, so if you’ve got a budget of $500 to spend in a month, set your daily cap at $16.45 ($500/30.4 days = $16.55) if your campaign runs every day of the month.
Now, keep this concept of ad overdelivery top of mind. Ad overdelivery allows AdWords to spend up to 20% more of your daily budget on any given day. Now that $16.45 daily budget could become actual spend of $19.74 ($16.45 + 20% overdelivery = $19.74). Remember here, though, that your maximum monthly spend is your daily budget multiplied by 30.4, so to keep you from exceeding your monthly cap, Google will underspend your budget on other days to make up for the overage you spent on previous day(s). In short, they even things out.
Ad Scheduling Makes Your AdWords Daily Budget Murky
If you’re using ad scheduling, forget everything I just said (okay, not everything). Ad scheduling adds a layer of complexity to setting monthly budgets. The key thing to remember is what I mentioned previously: Whatever number you put in as your daily budget, multiply it by 30.4 to determine the maximum amount you’ll be charged that month. Google sticks to its 30.4 days per month even if you’re not running ads every day of the month. It would be great if Google factored in ad scheduling, but they don’t, so you have to do some math.
Let’s go back to our $500-a-month advertiser, but this time we only want to run ads on weekdays (M-F), and there are 20 weekdays in our example month.
Simple math would dictate a budget of $25 per day ($500/20 days = $25 per day), but Google actually interprets this as a monthly budget of $760 ($25 x 30.4 days = $760) and therefore could go ahead and feel free to spend up to 20% more each day your ads run. You (or your client) could end up spending $600 ($25 + 20% overdelivery x 20 days = $600) instead of the budgeted $500 because Google doesn’t have the “missing” 10.4 days to underspend your budget and even things out. The point: Google doesn’t account for the ad scheduling and the fact you’re actually only showing ads on 20 days, not 30.4.
The solution to this issue requires a little math and some assumptions. First, assume you will incur costs that are 20% higher than what you have set as your daily budget. So in our example, I would reduce my daily budget to $20 to allow for 20% overspend (which would be $24) and finish the month just under budget at $480 ($24 x 20 days = $480). Going back to the daily budget x 30.4 rule, Google will interpret my $20 budget as a $608 monthly budget ($20 x 30.4). However, I won’t hit that because my daily budget is capped at $24 and I’m only running for 20 days.
- If you’re using ad scheduling, one thing to remember is you must recalculate your daily budget at the beginning of every month because not every month has the same amount of weekdays.
- The tips above are best applied when you’re in a competitive market and regularly hit your budget. If you’re having trouble hitting your budget, you might not need to be concerned with the 20% overdelivery and can therefore use a higher daily budget.
- You can also use AdWords automated rules to set your campaign(s) to pause when they hit certain spend thresholds, but these too come with some nuances to be aware of.