Why Do Budgets Overspend Even With A Target ROAS or CPA? – Ask A PPC via @sejournal, @navahf

This month’s Ask a PPC explores a common advertiser question: Why budgets sometimes overspend even when a target ROAS or target CPA is in place.

Understanding this behavior requires separating two concepts that are often conflated: budgets and goals. While they work together, they serve very different functions within auction‑based ad platforms. In this post, we’ll walk through how budgets and goals operate, why target ROAS can sometimes increase spend, and which levers advertisers can use to keep budgets under control.

Disclaimer: I am a Microsoft employee. The examples below reference Microsoft Advertising, but the underlying principles apply to any platform that uses automated or goal‑based bidding.

The Difference Between Budgets And Goals

When you set a daily budget, the ad platform averages across approximately 30.4 days. While there are daily fluctuations, the platform’s objective is to meet that average over the course of the period rather than strictly adhere to the number each day.

As a result, a daily budget of $50 can spend up to $100 on a given day. Here are the core reasons for “over” spending:

• Under spending too many days during the 30.4-day period.
• Average CPCs don’t align with the daily budget.

Goals function differently. A target ROAS or target CPA is not a spending limit. Instead, it is an optimization instruction.

A target ROAS asks the platform to achieve a specified return based on the conversion values being passed in. A target CPA instructs the platform to drive conversions at or below a certain cost, regardless of differences in conversion value.

Because goals are optimization signals rather than caps, the platform may spend more budget if it believes that doing so will help reach the target.

Why Target ROAS Can Increase Spend

Target ROAS is often perceived as a conservative bidding approach, but in practice, it can drive higher spend under certain conditions.

One common scenario involves high CPCs relative to budget size. If the average CPC exceeds roughly 10% of the daily budget, the platform may need to stretch spending in order to secure enough eligible clicks to meet the ROAS goal.

Overspending can also occur when there has been underspending earlier in the month. Since budgets are averaged, the platform may increase spend later in the period to compensate for missed opportunities. This behavior can look abrupt from an advertiser perspective, but it aligns with how budget pacing operates.

Accurate conversion values are critical in these situations. When incorrect or inflated values are passed to the platform, the system may believe it is driving strong returns when it is not. That misunderstanding can lead to increased spend in pursuit of perceived performance.

Another important consideration is how conversion actions are classified. Primary conversions influence bidding and reporting, while secondary conversions are observed but excluded from optimization logic. When too many conversion actions are set as primary, particularly if they overlap, the platform may double-count success and bias spend toward certain keywords, audiences, or signals.

How Advertisers Can Protect Against Overspending

Advertisers do have meaningful controls available to manage spend behavior.

The first is aligning budgets with auction realities. A practical guideline is ensuring that a daily budget can support at least 10 clicks at the average CPC. For non‑branded search, a 10% conversion rate is unusually strong. Without sufficient click volume, the platform may either restrict spend to high‑cost opportunities or over‑allocate budget to lower‑quality traffic to meet pacing expectations.

The second lever is being realistic about conversion trust. Many advertisers have inconsistent attribution models or partial tracking implementations, which reduces confidence in reported conversion data. When conversion data is not reliable, aggressive ROAS or CPA targets can be counterproductive.

In those cases, advertisers may choose to set more conservative goals or opt for a bid strategy that better matches the quality of available data. For example, if conversion values are inconsistent, target CPA may be more appropriate. Conversely, if certain conversions are significantly more valuable than others, a purely CPA‑based approach may lead to inefficient spend allocation.

A final lever that is often underutilized is ad scheduling. Restricting campaigns to specific hours of the day can reduce volatility and improve budget efficiency. When budget pressure exists, running ads during a focused three‑to‑six‑hour window rather than all day can provide stronger control without turning automation off entirely.

Closing Thoughts

When budgets overspend in goal‑based bidding strategies, it is rarely the result of a platform error. More often, it reflects a mismatch between budgets, goals, and the quality of data being supplied.

Careful attention to conversion accuracy, realistic budget sizing, and thoughtful use of controls such as ad scheduling can significantly reduce unexpected spend behavior. Automated bidding is most effective when inputs are intentional and aligned with actual business value.

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Featured Image: Paulo Bobita.Search Engine Journal