In Google Ads campaigns we can set only daily budgets. Not monthly budgets. But the monthly budget is dependent on the daily budget in more ways than one.
There are situations in which Google can spend over double your daily budget. Not only that, but it can also be spent several times over. In that case, don’t be scared if you see the “monthly charging limit reached” message.
Here we’ll describe how Google calculates your monthly budget. This is essential to understand if you have some overspent budget on your campaigns.
The most important thing is that you will learn what happens when you change your daily budget several times in one month.
Why Google can spend more than my set daily budget?
Let’s try to simplify this. First, about the set daily budget. It is actually the average daily budget that you set up for your campaigns. This is an average amount that you would like to spend on your campaigns.
Remember that when you are setting the daily budget – that you are actually deciding on the average daily budget. Average. Per day.
It is because there can be certain days when your targeted users are more interested (searching on Google) about your products/services than on other days.
For example, using Google Trends for the phrase “beer near me” for the past 7 days we can see:
The biggest trend, or volume, for that phrase, is on Saturday and Sunday. Surprised? 😉
In the same ways, there is always some degree of increased/lowered interest on certain days for almost any topic/product.
And this is why Google is trying to better implement your budget by lowering your spending on low-volume days and increasing your budget on high-volume days.
This is why we are talking about the “average” daily budget.
Because of that, you will be charged when your campaigns have spent double your set daily budget. But, if your campaigns have spent more than twice your daily budget – you don’t have to worry.
Google may charge you full amount at first, but it will return you any amount that is above the 2x daily budget as an overdelivery credit.
This is also important to remember for calculating your monthly budget: Google may spend a max 2x daily budget on a single day.
Now, let’s look at the “monthly” budget.
Monthly budget calculation scenarios
Let’s start with the basics. Google’s calculation for “monthly budget” is as follows:
For example, let’s say that we have set a daily budget of $10. The monthly budget would be: $10 x 30.4 = $304
This is an ideal case. Now, let’s take into account that Google may change your daily budget according to trends. We may see a fluctuation in actual daily spending in a given month. Something like this:
For a given example we can see that there are days when we have spent over $10 (red) and that there are days when we did not reach a set daily budget (green).
But, how much will you be charged?
We have spent $329 in that example. But, we won’t be charged that amount. Because the calculation says that the maximum monthly charging limit is $304 (Google’s calculated monthly budget).
The difference is $25. And we should receive that as an overdelivery credit.
This is pretty easy to understand. However, there are situations when we have changed our daily budget during the course of the month.
Changing campaign daily budget during the month – an ideal scenario
Let’s say that we have a $10 daily budget for the first 15 days, and for the rest of the month, we have a $20 daily budget.
The calculation is somewhat simple, although I have a feeling that it could be more logical. For the first 15 days, we have spent $150.
After 15 days, we have decided to change the budget to $20.
The calculation says that the monthly budget that we will be charged, i.e. the monthly charging limit, is $150 (already spent for first 15 days) + (15 days x $20 = $300) = $450
There is one important thing to remember. Google calculates a new monthly budget every time you change your daily budget.
Simple? Well, this scenario was an ideal situation. Let’s see a more realistic one:
Changing campaign daily budget during month – realistic scenario
In real life, your campaign could spend your daily budget differently every single day.
Remember, in an ideal situation we would be charged no more than $450. But, let’s do this calculation once more.
First, we just sum the spent budget for the first 15 days = $164.
Although we have set up a daily budget of $10, we have on average spent over that amount (average of $10.9 daily). Remember, if we didn’t change our daily budget then it would probably level up to the average amount of $10. Or, it would stay the same and you would receive the overdelivery credit.
Secondly, we calculate the sum for the next 15 days: 15 days x $20 = $300.
And finally, we sum that up to have our monthly charging limit: $164 + $300 = $464
Yes, that is a bigger amount than in an ideal (logical) situation. To calculate the overdelivery credit we take the final amount of spent budget (total spent budget for 30 days) and subtract the monthly charging limit we have come with above.
Yes, overdelivery credit is only $4. But if we used a monthly charging limit from an ideal situation, then the overdelivery credit would be = $18.
Have some questions about the way it’s calculated?
You can comment below, but I will let you come to your conclusions. Remember, Google is the one making rules and we have to abide by them if we want to play the Google Ads game.