Google's Search Algorithm Changed: What This Means for Your Ad Campaigns in 2025

Summary

Google recently changed how their search algorithm handles budget and bidding in advertising campaigns. Previously, advertisers needed to maintain specific CPC bids when scaling budgets. Now, when you increase a "limited by budget" campaign, Google allows dramatically lower CPC bids (50-200% lower) while still maintaining spend. This creates new opportunities for cost-effective campaign testing and scaling, particularly valuable for businesses with limited budgets who want to validate offers before committing large ad spends.

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Google just changed how their search algorithm handles budget and bidding, and most advertisers haven't noticed yet.

I came across a recent insight from a performance marketing expert that caught my attention, and it's something every New Zealand business running Google Ads needs to understand.

https://twitter.com/PerformanceMax/status/1980021073975644274

This change fundamentally affects how you should approach testing new campaigns, especially if you're trying to be budget-conscious while finding what works.

Let me break down what's changed, why it matters, and what you should do about it.

The Old Way (Before This Update)

For years, the standard approach to testing Google Search campaigns was straightforward. You'd start with a modest budget, usually around $50-100 per day. Then you'd find the "sweet spot" cost-per-click bid, which was the lowest manual CPC that allowed your budget to spend evenly across 24 hours. Once you had that baseline, you'd let the campaign run to gather performance data. After identifying what worked, you'd scale gradually by increasing your budget, while maintaining relatively stable CPC bids throughout the process.

This approach made sense because Google's algorithm required specific bid levels to maintain consistent delivery. If you bid too low, your ads simply wouldn't show. If you bid at the "sweet spot," you'd get even pacing throughout the day, ensuring your budget was working consistently.

For New Zealand businesses with limited budgets, this was the safe way to test new campaigns. You could validate an offer or campaign approach without burning through thousands of dollars. A Christchurch-based service business, for example, could test a new campaign concept for $350 per week and get meaningful data before committing larger budgets.

What's Changed

Google's algorithm now behaves differently when you increase budgets on campaigns that were previously "limited by budget."

The New Behaviour:

When you bump up a budget that was showing "limited by budget" status, Google now allows for dramatically lower CPC bids (50-200% lower) while still maintaining spend.

What this means in practice:

Old way:

• $50/day budget with $2.00 CPC = even spend across 24 hours
• Increase to $200/day = need to maintain $2.00 CPC (or higher) for delivery
• Lower your CPC = delivery drops, budget doesn't spend

New way:

• $50/day budget with $2.00 CPC = even spend across 24 hours
• Increase to $200/day = can reduce CPC to $1.00 or even $0.80
• Spend still occurs despite heavy CPC reductions
• Budget continues to deliver (this didn't used to happen)

Why This Change Matters for NZ Businesses

This algorithmic shift creates both opportunities and considerations for how you manage campaigns.

The Opportunity: More Efficient Testing

You can now be much more aggressive with budget scaling while reducing costs per click.

Hypothetical example - Auckland Marketing Consultant:

Week 1: Test campaign at $50/day, manual CPC bid $3.50

• Results: 14 clicks per day, $50 spent evenly
• Performance looks promising

Week 2 (Old approach): Scale to $200/day, maintain $3.50 CPC

• Results: 57 clicks per day, but still paying $3.50 per click
• Nervous about spending 4x more

Week 2 (New approach): Scale to $200/day, reduce CPC to $2.00

• Results: Similar click volume but much lower cost
• More efficient spending as you scale
• Less risk in the scaling phase

The Consideration: Understanding the Mechanism

Google's algorithm is now more flexible in finding cheaper inventory when you increase budgets.

What's likely happening:

When your campaign was "limited by budget" at $50/day, Google was showing your ads only for the most competitive auctions at your bid level.

When you increase to $200/day, Google now has flexibility to:

• Show ads in less competitive auctions (lower CPC)
• Distribute impressions across more time periods
• Access inventory that wasn't available at limited budgets
• Fill your increased budget with cheaper clicks

This isn't a "trick" - it's algorithmic optimisation.

Google's machine learning is getting better at finding efficient spending opportunities when given more budget flexibility.

The Testing Strategy for 2025

Based on this change, here's the updated approach for testing new campaigns cost-effectively:

Phase 1: Proof of Concept (Week 1-2)

Budget: $50-100 per day Bidding: Manual CPC Goal: Validate the offer/campaign concept

What to do:

• Set modest daily budget ($50-100)
• Find sweet spot CPC for even 24-hour delivery
• Let campaign run for 7-14 days
• Analyse performance data:
• Are you getting clicks from right audience?
• Are clicks converting to leads/sales?
• What's the cost per conversion?

Success criteria:

• Cost per conversion is within acceptable range
• Quality of leads/sales is good
• Conversion rate indicates campaign viability

Phase 2: Budget Expansion Test (Week 3)

Budget: 3-4x your proof of concept budget Bidding: Manually reduce CPC by 30-50% Goal: Test the new algorithmic behaviour

What to do:

• Increase daily budget significantly (e.g., $50 to $200)
• Reduce manual CPC bid by 30-50%
• Monitor spend and delivery closely for 3-5 days

What to watch:

• Does spend still occur despite lower CPC?
• Is click quality maintained?
• Are conversions still happening at acceptable rate?
• What's the new cost per conversion?

Expected outcome: You should see continued delivery at lower cost per click, potentially improving your cost per conversion.

Phase 3: Scale or Transition (Week 4+)

Based on Phase 2 results, choose your path:

Option A: Continue manual CPC scaling

• Keep increasing budget gradually
• Test further CPC reductions
• Monitor performance closely
• Good for maintaining tight control

Option B: Transition to automated bidding

• Switch to Target CPA (tCPA) or Target ROAS
• Open up budgets significantly
• Move to broad match keywords
• Good for hands-off scaling

When Each Approach Makes Sense

Manual CPC with Budget Scaling (New Discovery)

Best for:

• Testing completely new offers
• Limited budgets (under $5K/month)
• Businesses wanting tight cost control
• New advertisers learning the platform
• Service businesses with longer sales cycles