Google’s Aug. 17 Smart Bidding Update Raised CPCs 15.8% for Budget-Limited Campaigns, Data Shows

Google’s Aug. 17 Smart Bidding update has changed how budget-limited Google Ads campaigns compete, and early data shows those campaigns are now paying more per click. Analysis from Smarter Ecommerce’s head of ecommerce insights Mike Ryan, reported by Search Engine Land, found median CPCs for budget-limited Target ROAS campaigns rose 15.8% after the update, from €0.38 to €0.44. CPCs for campaigns that were never budget-limited fell 13%, to €0.33.

What Google changed

The update covers budget-limited campaigns using target-based bidding (Target CPA, Target ROAS and Target CPC) in Search, Shopping, Performance Max, Demand Gen and Travel. Google said the goal is more predictable performance around the target an advertiser actually sets, especially when budgets change. The global rollout finished Aug. 27.

Before the change, Smart Bidding effectively held back bids when a campaign was about to run out of budget, which bought cheaper clicks and let many campaigns beat their targets. Google’s own example: a budget-limited campaign with a $10 target CPA that had been delivering a $5 CPA could now move closer to $10 unless the advertiser changes the target.

The data

Before Aug. 17, more than half of the budget-limited campaigns Smarter Ecommerce analyzed were beating their ROAS targets. Among campaigns that weren’t budget-limited, only 30% overdelivered and 57% landed on target.

Impression share shifted as well. The median budget-limited campaign used to lose about 45% of impression share to rank and only 4% to budget. Afterward, rank losses fell to about 30% and budget losses rose to roughly 33%. Overall median impression share for those campaigns dropped from 40% to 31%. In a follow-up with two months of data, Smarter Ecommerce said the median ROAS overshoot for budget-limited campaigns, about 20% above target before the update, fell to roughly zero within three weeks.

What advertisers can do

Ryan’s options include accepting reduced reach, moving tROAS targets closer to historically delivered ROAS, raising budgets where the economics support it, or rethinking the bidding strategy. Google likewise recommends reviewing budget-limited campaigns that used to overperform and checking whether their current targets still reflect actual business goals.