Just in time for the holidays - Adwords announced major changes to the way their system handles daily campaign budgets. The official word is that budgets now have more "flexibility".
tl:dr Your individual Adwords campaigns can now spend up to DOUBLE your daily budget cap. i.e. The idea of "overspending" is gone, it's now cleverly rebranded as "flexible spending".
Depending on your point of view several theories might come to mind as to why Google is making this change.
Nonetheless, the change has been made, it's our job to understand how this could affect our clients' businesses.
The official Adwords article states:
On days with lots of high quality traffic, your costs could be up to 2 times your daily budget. This spending is balanced by days when your spend is below your daily budget.
Keep in mind, you won’t be charged more than your monthly charging limit: the average number of days in a month (30.4) multiplied by your average daily budget.
This seems to reassure that at some point Google will reconcile the spend with the billing and make an adjustment so as not to bill more than your daily budget caps intended. However, given how frequently budgets change I would not count on Google to not overspend (and overbill).
The budget change further reduces control and transparency, but the change aligns with the steady shifts that Google continues to make towards forcing automation & trust in the Adwords system. Features like:
Most of those tools work pretty well, but they don't always work. The concern is not so much whether this budget change will help Google drive more revenue for its advertisers. The concern is that this change reduces the ability for advertisers to allocate budget across channels as effectively.
Google has also provided an Overdelivery Report to help proactively identify problem campaigns:
For our clients we have to ensure that we closely monitor performance, especially on high volume campaigns. This could mean lowering budget caps by up to 50% to compensate for this change. Once we have a week or two of data to work with we'll have a better idea of a recommendation for how to handle budgeting going into the holidays.
In the long term I think this will work out fine for most companies, but it will require a closer eye on spend for those with no tolerance for overspend. It will almost certainly change the way we look at campaign budgeting moving forward.