Google Ads Bidding Update: What We’ve Learned & What You Need To Know

As an e-commerce growth agency managing high-volume Google Ads accounts, platform updates usually land in our inbox with a mix of optimism and healthy skepticism.

However, when Google deployed its major Smart Bidding update affecting budget-constrained campaigns on August 17th, it immediately triggered alarm bells across digital marketers.

Over the past few weeks, our growth team has been analysing performance shifts across Search, Shopping, Performance Max, and Demand Gen campaigns. We’ve done the research so that we can pull back the curtain on what actually changed under the hood. 

We don’t want you to be caught up in the mix of brands and businesses struggling to navigate this change. So don’t panic. We will walk you through the mechanics behind this bidding update, show you how to audit at-risk campaigns, and outline the exact step-by-step remediation plan we are executing for our clients to protect ROI and prevent cost spikes.

What’s changed?

On August 17th, Google rolled out a critical update to its Smart Bidding infrastructure, specifically targeting campaigns set to Target CPA (tCPA), Target ROAS (tROAS), or Target CPC (for Demand Gen) that carry the limited by budget status.

Historically, when your campaign hit its daily budget, Smart Bidding used that daily spending cap as an artificial floor/ceiling which could cause the algorithm to overperform against its target. If you set a Target CPA of £50 but capped the budget at £100/day, Google’s machine learning algorithm would cherry-pick only the cheapest conversions, quietly delivering an actual CPA of £25 for example.

With this update, Google has cut the tie between daily budget constraints and bid strategy targets. The algorithm will now strictly enforce your target, regardless of whether your daily budget runs out early in the day.

What does this look like for your campaign targets?

To further understand what the changes mean for performance, we’ve broken this down:

This was working for us, so why did Google change it?

Previously, when we or our clients increased budgets on budget-constrained, overperforming campaigns, the algorithm would expand into higher-cost auctions to spend the new budget. In some cases, this has caused confusion as to why scaling sometimes ruins ROAS.

By forcing the algorithm to deliver strictly on the set target even under budget constraints, Google has separated spend from efficiency. While this makes budget scaling far more predictable moving forward, it has introduced a bit of a risk for accounts relying on loose targets as a placeholder.

What should you do about it?

This update might not affect every campaign in your account, but the ones it does affect definitely should be looked at.

Affected Campaign Types

• Search & Shopping Campaigns using tCPA or tROAS.
• Performance Max (PMax) Campaigns using tCPA or tROAS.
• Demand Gen Campaigns using tCPA, tROAS, or Target CPC.

How to Audit Your Account

To catch campaigns at risk of cost spikes or ROAS degradation, run a quick account diagnostic:

1. Filter your campaign view for status: Eligible (Limited by budget).
2. Compare your Set Target (tCPA or tROAS) against your Actual Delivered Metric over the last 30–60 days.
3. Flag any campaign where actual CPA is significantly cheaper than set tCPA, or actual ROAS is significantly higher than set tROAS.

Risk Example: If a Search campaign has a set tCPA of £40, but historical budget constraints allowed it to deliver at an actual CPA of £22, the algorithm under this update will bid more aggressively to reach that £40 target. You will capture more impression share, but your cost per acquisition will nearly double unless you update the setting.

Here’s a helpful plan

If your account audit reveals campaigns with mismatched targets and actuals, implement this three-part action plan as soon as you can.

Step 1: Use The Bid Target Adjustment Tool

Google launched a dedicated Bid Target Adjustment Tool directly into Google Ads to highlight affected campaigns.

• Find it via the notification banner reading “Review your campaign targets” or through Campaign Settings > Bidding > Review Campaigns.
• Here you’ll also find historical actual performance alongside a recommended target adjustment.

Step 2: Practice Gradual Target Stepping

While Google offers an easy one-click “Apply” button to align targets to recent actuals – be careful! Making massive, sudden target adjustments can push Smart Bidding algorithms into severe learning mode.

• For tCPA: Lower your target in incremental steps (10–15% at a time) toward your actual historical CPA.
• For tROAS: Increase your target incrementally (10–15% at a time) toward actual historical ROAS.
• Observation Window: Allow 1–2 conversion cycles before making additional adjustments to avoid destabilizing performance.

Step 3: Pivot Strategy Based on Your Budget Flexibility

• If Budget is Flexible: Keep your current target settings and raise daily budgets. Since the update prevents efficiency from fluctuating when budget is added, you can now safely scale spending.
• If Budget is Strictly Fixed: Try switching the campaign from Target CPA / Target ROAS to Maximise Conversions or Maximise Conversion Value. Unconstrained Maximise Bidding is explicitly designed to extract the maximum possible conversion volume out of a hard daily spend limit without forcing the campaign to meet an artificial unit metric.

Final thoughts

Our Senior Digital Marketing Manager Gina advised, “As Google indicated, campaigns that were achieving ROAS figures significantly above our targets while being limited by budget were impacted the most. We realigned targets to reflect actual performance and have seen a return to positive results.

Long term, it will be a balancing act of business goals vs what ROAS or CPA Google can realistically achieve. Targets need to be based on data otherwise spend could get wildly inefficient.”

Need help auditing your Google Ads account after the latest limited by budget updates? 

Contact our digital marketing experts today to see how we can help you navigate changing your bid strategies.