The “Limited by budget” status in Google Ads results from one of the system’s fundamental operating principles — the guarantee of not exceeding the average daily budget.
Budget limitation in Google Ads
The Google Ads system guarantees that, on a monthly basis, the average daily budget set in the campaign will not be exceeded and we won’t spend more on advertising than what was entered in the campaign settings.
On individual days, daily budgets can be exceeded considerably, but on a monthly scale the spending limit will be preserved. If such an overrun occurs as a result of delays in the system’s operation, the funds spent over budget will be refunded. These are usually small amounts.
If interest in a given keyword is high, the assumed budget may not be enough. Google allows the daily budget to be exceeded on individual days, but sooner or later the system will have to react to the budget mismatch.
Depending on the Google Ads campaign settings, the system will show our ads less often, spreading ad serving evenly throughout the day (the default setting), or serve ads until the daily budget is exhausted, which will mean that from a certain hour our ads will not be shown.
The Google Ads interface signals this with a message in the campaign view:
Two kinds of budget limitation
As you can see in the illustration above, there are two kinds of “limited by budget” statuses in Google Ads:
- A “hard” budget limitation, marked in red, with a message informing you that your campaign is limited by its average daily budget, which means your ads aren’t showing as often as they could.
- A “soft” budget limitation, marked in orange, with a message informing you that your budget is limiting the number of conversions you can get, and raising your budgets will increase the estimated number of conversions.
The “soft” limitation
This second type of budget limitation appeared in Google Ads with the spread of smart bidding strategies that maximize conversion value (or conversion volume) within a set budget.
Such strategies adjust bid levels to the given budget by default, and the message is merely an indication that the campaign is not using its full potential.
As Google puts it: if you raise your budget to the recommended level, you may get an increase in the number of conversions that outweighs the increase in the cost of individual conversions, since simulations show that the campaigns can generate more conversions with a smaller relative increase in the total acquisition cost.
Google is indicating that the campaign is far from being over-invested. Raising the budget will probably increase the conversion cost (lower the ROAS), but the increase will be relatively small compared to the growth in the number of conversions or revenue, which may be profitable (see the article on optimal campaign goals).
Google has no information on whether the campaign’s current effectiveness (ROAS, CPA) is satisfactory, so it merely suggests considering changes, without clearly indicating that this is an error (hence the different color).
The “hard” limitation
The hard limitation indicates that, given the CPC bids, ROAS or CPA targets being used, the budget is too low. Google sees that the campaign’s goals are mismatched with the budget and warns us about it.
Consequences of being limited by budget
Being limited by budget is an undesirable phenomenon with a negative impact on campaign effectiveness, because:
(i) Users searching Google for a specific product often perform several, or even a dozen or so, searches before they finally choose whose offer to take. With a limited budget we risk that these people won’t find our site. Returning users usually convert better, as they are at a later stage of the purchase process (for example, after doing some initial research into the other offers available on the market, they decide to finalize the purchase)*.
(ii) Being limited by budget means the campaign is most likely not optimal. We’re buying expensive clicks that we could give up and, in exchange, buy more cheaper or better-converting clicks within the same budget.
* For the same reason it is not beneficial to interrupt campaigns (which happens, for example, when prepaid funds run out), because the purchase process often stretches over time and lasts from a few minutes to a few weeks or even longer, especially for more expensive purchases that require some thought.
Avoid exhausting your budget
Google recommends avoiding exhausting the daily budget. As presented above, it has a number of unfavorable consequences. So when we see the “Limited by budget” flag, we should take optimization action, because this flag means the campaign is probably not being run optimally at the moment. This applies especially to search network campaigns (in the Google search engine).
Raising the budget
One of the simplest solutions is to raise the budget. This is of course what Google will suggest when we hover over the icon next to the “Limited by budget” message:
Before making such a decision, however, it’s worth checking whether the campaign is currently profitable. Otherwise there is no point in increasing the budget of a campaign that doesn’t deliver adequate results relative to what is spent on it.
What if we can’t raise the budget?
Often, however, the budget limitation results from how advertising budgets are managed in a given organization, and we cannot spend more than what was budgeted, even if the campaign delivered great results. And although for most search campaigns and other direct response campaigns this kind of planning is inherently wrong, in the reality of working with clients we do sometimes encounter such a constraint.
The “Limited by budget” message most likely means your campaign is not optimal.
So if we can’t raise the budget, we should optimize the campaign within the existing budget. Among the campaign settings options in the Bidding strategies section, there is one where Google Ads will set my bids to maximize clicks within the daily budget. This is, however, an option “for the lazy” that will rarely be optimal, as it won’t necessarily take our campaign goals into account and, when demand drops (and with it the number of searches), it may needlessly aim to spend the entire budget, overpaying for barely profitable positions.
When limited by budget, you should simply lower the offered CPC bids, starting with the keywords that deliver the worst results. Remember that you shouldn’t switch off worse-converting campaigns, ad groups or keywords, but rather reduce the unit price paid for them until you reach the desired profitability. It’s also worth reviewing campaign effectiveness across time periods (days of the week, times of day) and in specific geographic areas, and lowering bids in those segments where the ads perform less effectively.
Lowering bids will cause the ads to show in lower positions. Then, although we will be showing continuously (without the interruptions caused by the budget limitation), we will achieve a lower CTR, as a result of which the budget won’t get spent. At the same time, for the same amount we will buy more clicks, because their unit price will be lower! So not only will we eliminate interruptions in ad serving, but we will also lower unit costs.
Lowering positions most likely should not affect the conversion rate. Such phenomena are extremely rare. Nevertheless, you should check whether the lower positions have negatively affected the quality of the acquired traffic.
What about the “soft” limitation?
When Google notices that a campaign optimized for maximizing the number or value of conversions is not using its full potential, first of all check whether the current conversion cost or ROAS meets your assumptions.
If we are confident that a slightly worse ROAS or CPA will still be profitable for us, we should consider following Google’s suggestion. Otherwise, nothing needs to be done.
Display network campaigns
Budget limitation can also affect display campaigns. And although in this case we can’t speak of losses resulting from interruptions in serving, here too we can gain from optimizing the campaign and adjusting it to the budget.
We can achieve this both by lowering bids in less effective channels and by narrowing the campaign’s targeting — e.g. a campaign that was shown across the entire network in the context of specific keywords can be narrowed down and shown only to people with specific interests, or better yet — we can lower the bid for that campaign and raise the bids for people with specific interests to the levels we currently use.
Simply lowering bids in a display campaign may cause the ads to stop showing on some of the more contested placements, which may, however, also convert better. So keep in mind that changing bids can affect the distribution of impressions across placements and the conversion performance of a display campaign much more than in the case of a search campaign. In such a situation, separate bids should be used for individual placements.
You can also consider introducing a limit on impressions per user (frequency capping). In practice, limiting impressions to a few per day is most often the recommended solution for the majority of display campaigns.
