Key concept: AdWords budget/overdelivery

The concept

Advertising has changed a lot over the years, and with the growth in online advertising and the web, AdWords offers advertising for both large and small advertisers with any size budget. This flexibility means that for our self-managed AdWords accounts, advertising with our program doesn't require a large, upfront budget allotment, contract, or a per-month spend.

Instead, we ask advertisers to set an average daily budget -- you tell us the most you want to spend per day, and we'll work to deliver your ads whenever they're eligible to earn clicks that meet that budget. This is called ad delivery, or ad serving.

For standard ad delivery, we'll evenly show them throughout the day as often or as little as needed to earn those clicks. Due to the constantly changing ad auction, number of advertisers, web users, and shifts in search and web browsing trends, on some days we might not meet your average daily budget, and on others we might slightly exceed it. We call this overdelivery. We'll never go over your average budget by more than a 20% difference. If we underdeliver, you'll just pay for fewer click costs than your limit in that day. If we overdeliver, you'll see the click costs charged on your billing summary page.

Since your click costs are charged intermittently throughout a billing period (one month), it may appear in your billing summary as if you've overpaid in these cases, or received less traffic than you initially requested with your average daily budget settings. However, by the end of a given billing period, you're never charged more than the average number of days in a month (roughly 30.4) times your average daily budget. For campaigns that are paused in the middle of the month or that otherwise don't run for the full month, you may see discrepancies between your average daily budgets and your total charges. Our system will always credit you any overage due at the end of the billing period.

Why it matters

Your average daily budget matters because without one, we can't run your ads! Here's why:

  • At the 12:00 am mark each day, your budget lets us know how much, on average, you want to spend, and how often you want your ads to compete in the AdWords auction.
  • For ad delivery using accelerated budgets: If you still have budget left to spend for the day, we'll typically enter your ad in the auction for eligible impressions.
  • Each impression is a chance to earn a click, and each click will cost you an amount up to your maximum bid.
  • Eventually your ad will earn enough clicks where your total cost-per-clicks add up to about your average daily budget. When they reach your limit for the day (no more than 120% of your average daily budget), your ad is no longer eligible to enter the auction for the rest of the day.
    • Depending on your targeting settings and other factors, such as the popularity and traffic for your keywords, you may spend your entire budget for the day.
    • As mentioned in the overview above, on a given day we may go slightly over your average daily budget. However for the overall billing period (assuming your ad runs during the full month), you won't be charged more than the average number of days in a month times your average daily budget.
  • We stop the clock at 11:59 pm that day, and reset your budget for the following day. At 12:00 am, we start with your original average daily budget again. If your previous day involved underdelivery, we'll then try to show your ad a little more often to compensate for the difference in delivery the previous day.

How it's used

For self-managed accounts, you'll need to set an average daily budget for every campaign you create within AdWords.

If you're used to working with a monthly budget and don't know what average daily budget to set, you can try a couple of things:

  • After entering keywords as you build a new campaign, as you set up your first ad group, you'll be shown traffic forecasting data (estimated clicks and costs) for your selected keywords, bid, and daily budget. You can adjust your bids, budget, and keywords based on this data or try out your current settings and make changes later based on their performance.
  • You can take the monthly target you'd like to reach and divide by 30.4 (the average number of days in a month).
  • If you don't want a slow and steady delivery of impressions throughout a 24-hour cycle, you can change the Ad Delivery campaign setting to have us show your ads more quickly until your budget is reached. We'll show your eligible ads until your budget has been met, and then stop for the day. This could mean your ads earn all their impressions in the early morning or afternoon, well before 24 hours have passed.
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