Google recently announced a major update to its smart bidding algorithm. This update will change how it handles budget-limited campaigns using Target CPA (tCPA) and Target ROAS (tROAS).
This update will have a major impact on your ROI and campaign performance. You may even see drops in conversions if you don’t prepare properly. Here’s everything you need to know to best prepare your campaigns.
Your Campaign Targets Will Actually Matter Now
Currently, if a campaign is limited by budget, Google’s algorithm seeks the most cost-effective conversions. This often results in campaigns "outperforming" the target goals you’ve set for them, for example, netting a $5 CPA when your target was $10. This made it hard to predict what would happen when increasing your campaign's budget. In our experience, it would sometimes lead to ads tanking rather than improving, making it difficult to scale ads consistently.
After August 17, this will change. Google will encourage budget-limited campaigns to optimize more closely to your exact target set. The aim is to make these ads more predictable and easier to scale. By forcing the algorithm to stick strictly to the target boundary, performance should scale more predictably as you increase the budget.
What Does this Mean for You?
There are several positives and negatives to this update, and it’s important to understand just what will happen to your campaigns once it’s in effect. Currently, if you were to leave your campaigns unchanged, a few things would happen:
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Higher Costs: Campaigns that used to beat your targets will drift up to match them, potentially increasing your average cost-per-acquisition.
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More Volume: While costs may rise to meet your target, the algorithm will expand its reach, potentially finding more total conversions within your budget limit.
While predictability is a plus, we can’t help but be frustrated by the direction of this update. While it was hard to predict just what an ad limited by budget would do, this new update forces you to spend more to get the same efficiency and performance you’d achieve for less.
We’re keeping an eye on this update and planning on slowly adjusting our targets up to see what happens. There are a few things we plan on doing to best prepare our client’s accounts for this update.
How to Prepare Your Account:
We recommend not waiting for August 17 to see how your accounts react. Take these four proactive steps now:
1. Audit Your Budget-Constrained Campaigns
Filter your Google Ads campaigns to find any that use Target CPA or Target ROAS and display the "Limited by budget" warning status. These are the campaigns that will be impacted.
2. Align Your Targets to be Realistic
Look at the historical data for those budget-limited campaigns. If a campaign has a $10 Target CPA but is averaging a $5 CPA, consider lowering your Target CPA closer to $5. This will prevent the algorithm from artificially driving up your costs post-update. If you want your target CPA to be closer to the higher number, be prepared to pay a bit more and increase your budget to maintain your volume.
3. Consider Shifting Bid Strategies
If a campaign is permanently budget-constrained, target-based bidding might no longer be the best choice. Consider switching these campaigns to Maximize Conversions or Maximize Conversion Value. These strategies are designed to achieve the highest efficiency within a hard budget ceiling.
4. Use Google's Adjustment Tools
Google is rolling out a built-in Bid Target Adjustment Tool within the recommendations tab. Use this tool to see automated suggestions for safely recalibrating your targets without disrupting operations.
Overall, this update is important to understand and prepare for. If you have any questions or need help with your Google Ads strategy, get in touch.
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