What the August 17 "Limited by Budget" bidding change means for advertisers
For years, advertisers running budget-constrained campaigns have benefited from a quirk in Google Ads' Smart Bidding. A campaign with a Target CPA of £10 might quietly deliver conversions at £5 because the budget was limiting spend. Likewise, a Target ROAS campaign could consistently outperform its target without any intervention. While those efficiencies weren't guaranteed, they became commonplace. However this will no longer be the case beginning August 17, 2026.
Google is updating how Smart Bidding behaves for campaigns that have been "Limited by budget", meaning it will begin adhering much more closely to the bid targets advertisers have actually set. While budgets and targets won't change automatically, campaigns that have historically overperformed because they were budget constrained may begin drifting back toward their stated Target CPA or Target ROAS. It's a subtle technical update, but one that could have a significant impact on performance if advertisers aren't prepared.
What's changing?
Until now, Smart Bidding has often allowed budget-limited campaigns to outperform their bid targets. Google's own example illustrates the change clearly: a campaign with a Target CPA of £10 that has been consistently converting at £5 because it's limited by budget, will gradually move closer to an actual CPA of £10 after August 17, assuming no adjustments are made.
Importantly:
- Budgets won't automatically increase.
- Target CPA or Target ROAS settings won't automatically change.
- Google isn't increasing spend.
Instead, Google is simply removing the unofficial efficiency that many budget-constrained campaigns have enjoyed for years.
Which campaigns are affected?
Google is notifying accounts that have had campaigns marked "Limited by budget" at any point during the past 12 months.
That lookback period is important. A campaign that was budget constrained months ago, even for a brief amount oftime, may still be included even if it appears unconstrained today.
The update applies to:
- Search campaigns
- Shopping campaigns
- Performance Max
- Demand Gen
- Display
- Hotel
- Travel
Using either:
- Target CPA
- Target ROAS
For Performance Max and Demand Gen campaigns, there's another consideration. As Smart Bidding adheres more closely to targets, advertisers may also see changes in how spend is distributed across inventory and channels within the campaign.
Why this matters
Many advertisers, particularly those operating within fixed budgets, have unknowingly benefited from performance that exceeded the targets they originally set.
Brand campaigns are especially exposed. Because branded searches naturally convert at a much higher rate, these campaigns are often budget capped and consistently outperform Target CPA or Target ROAS. Many accounts rely on those efficiencies to maintain healthy blended performance across broader account portfolios.
If those campaigns begin moving back toward their stated targets, advertisers could see the following without changing a single budget or bid strategy:
- Higher CPA
- Lower ROAS
- Reduced overall account efficiency
More broadly, this update highlights an issue that's existed across the industry for years.
Many bid targets are set during campaign launch and then rarely revisited as performance improves. What started as an appropriate Target CPA two years ago may now bear little resemblance to how the campaign actually performs today.
August 17 effectively puts a deadline on reviewing those assumptions.
Google's new Bid Target Adjustment Tool
Alongside the update, Google has launched a Bid Target Adjustment Tool, giving advertisers Google's own assessment of campaigns where target performance and actual performance differ. This is a welcome improvement over manually estimating which campaigns require attention.
However, there's an important nuance advertisers should be aware of. The tool currently appears to flag every campaign that has been "Limited by budget," not just those significantly outperforming their targets, but ones that are underperforming. This creates a potential risk. If advertisers simply accept Google's recommendation to update targets to match recent performance without first understanding why the campaign was flagged, they could end up locking in worse performance rather than correcting an overperformance issue. For that reason, the tool's recommendations should be reviewed carefully rather than applied as a blanket solution.
A more effective approach is to separate campaigns into two groups:
- Campaigns genuinely outperforming their targets, where target adjustments or additional budget may be appropriate.
- Campaigns already underperforming, which require separate investigation before any bidding changes are made.
Where changes are required, making them well ahead of August 17 allows sufficient learning time. Google recommends allowing one to two conversion cycles for Smart Bidding to stabilise after significant target changes.
How Croud is approaching the change
At Croud, our teams are auditing affected accounts and prioritising campaigns where there's a significant gap between actual performance and bid targets.
However, that doesn't automatically mean every target should change. For some advertisers, conservative targets are intentional. They help budget-limited campaigns continue spending while maintaining efficiency.
For others, the target simply hasn't been updated as campaign performance has evolved. Understanding the client's objective is more important than simply reducing the gap between target and actual performance.
The recommended approach includes:
- Reviewing all potentially affected campaigns—not just those receiving notifications.
- Prioritising brand and other structurally efficient campaigns.
- Using target adjustments earlier in the optimisation process where appropriate.
- Allowing sufficient learning time before Google's August rollout.
- Separately evaluating campaigns that are already underperforming.
What advertisers should do now
The biggest mistake would be assuming this update doesn't apply simply because no notification has appeared. The 12-month eligibility window means campaigns that were only briefly budget constrained may still be affected.
This is also an ideal opportunity to revisit bid targets more broadly. Even outside the campaigns Google has identified, many accounts contain Target CPA and Target ROAS settings that haven't been reviewed for months or even years. Auditing those targets now can help avoid unexpected shifts in performance later this year.
Perhaps most importantly, it's worth preparing stakeholders before August 17. If CPA begins rising or ROAS starts falling in late August without explanation, those conversations become much more difficult than if expectations have already been set.
The bottom line
While this update may cause short-term disruption for some advertisers, it ultimately encourages healthier account management. Bid targets should reflect business objectives, not historical defaults that no longer match reality.
If you have questions about how this update could affect your Google Ads account, get in touch with the Croud team here.
