Key takeaways
- Google’s target-based bidding update makes CPA and ROAS targets more active in budget-limited campaigns.
- Ecommerce accounts beating target today risk lower ROAS or higher CPA if old targets remain unchanged.
- Performance Max and Shopping campaigns need margin-led target setting, not blended round-number ROAS goals.
- Budget caps are not automatically bad. The missing clicks only matter when they are profitable clicks.
- Audit Limited by budget campaigns now and decide whether to reset targets, raise budgets or accept drift.
The target-based bidding update is not a harmless Google Ads housekeeping change. For ecommerce advertisers, it changes the job your CPA and ROAS targets perform inside budget-limited campaigns. Targets that used to sit above actual performance as loose ceilings now become numbers Google works towards more directly.
That matters because many shopping-led accounts have lived comfortably with old targets. A Performance Max campaign set to 400% ROAS but delivering 600% looked efficient. After this change, that gap becomes spendable headroom. If your margin model cannot tolerate the drift, your reported ROAS falls and nobody in the account receives a warning labelled profit erosion.
Our view is firm: this update rewards advertisers who run targets from contribution margin and punishes those using inherited Smart Bidding settings. If your ecommerce account is budget-capped, target-led and thin on margin data, act before the system spends your efficiency for you.
What’s actually changed in target-based bidding
From 17 August, Google Ads will change how budget-limited campaigns using target CPA or target ROAS deliver against the targets set in the account. The change applies across Search, Shopping, Performance Max, Demand Gen, Travel and Display. App campaigns, Video reach campaigns and Video view campaigns are excluded.
Here is the mechanism. A campaign marked Limited by budget has historically bought as much efficient demand as the budget allowed. If the target CPA was £100 and actual CPA came in at £50, the budget cap stopped the algorithm before it needed to spend up to the target. After the target-based bidding update, Google will bring actual performance closer to the target you set, including when budgets change.
Google is not raising your budget automatically. It is treating your existing target as a more active instruction. For Performance Max and Demand Gen, that also means traffic distribution across channels will shift as the system rebalances towards the target.
Why this matters for ecommerce advertisers
The commercial risk sits in the gap between actual performance and the stated target. That gap used to look like efficiency. Now it becomes permission for Smart Bidding to buy more expensive conversions until the average gets closer to the target.
For a retailer with clean margins and a true ROAS floor, that is manageable. If 350% ROAS is the point where a category still makes money after product cost, fulfilment, returns and payment fees, a 350% target is a valid instruction. The problem is that many accounts do not work like that. They use round-number targets, old targets from a previous agency, or blended targets that ignore category margin.
The money moves at the margin
The first conversions in a capped Shopping or Performance Max campaign are usually the cheapest. They come from stronger intent, better-known products, easier remarketing demand and queries with proven purchase behaviour. When Google has more room to work towards a looser target, it buys the next layer of demand. That layer costs more, converts worse or carries lower order quality.
That does not mean volume is bad. It means volume has to be bought deliberately. A £20,000 monthly budget moving from 600% to 450% ROAS changes the profit conversation fast if the catalogue is built on narrow gross margin. Revenue still rises. Google Ads still looks busy. The net contribution falls.
This is where ecommerce reporting often misleads directors. Platform ROAS treats £1 of revenue as £1 of revenue. Your finance team does not. A 700% ROAS sale on a high-margin accessory is not the same as a 700% ROAS sale on a bulky discounted item with high return risk. The target-based bidding update makes that distinction more important because Smart Bidding will follow the target, not your stockroom reality.
Budget caps are not automatically waste
PPC Geeks impression-share analysis from Q2 2026 shows the median account loses about 18% of its search clicks to capped budgets, and nearly two in three, 39 of 62 accounts, lose more than 10%. That is an opportunity, not a spend more nag: the point is knowing which missing clicks are worth chasing, not raising budgets blindly.
The same principle applies here. A campaign that is Limited by budget and beating target is not automatically underfunded. It is constrained. The right decision depends on whether the extra conversions available near the stated target still make commercial sense. If they do, scale. If they do not, tighten the target before Google uses the room.
PPC Geeks’ View
The specific problem advertisers will face is target drift disguised as normal account variation. We see this most often in ecommerce Performance Max accounts using target ROAS with one blended campaign across mixed-margin products. The campaign reports acceptable revenue growth, but spend migrates towards products and placements that meet the platform target while weakening real profit.
A Smart Bidding target is not a wish. It is an instruction to spend your money up to a defined efficiency point, so set it from margin, not from memory.
— Max Jones, Senior PPC Account Manager, PPC Geeks
Our practical observation from live account work is simple. Accounts with separate product groups, margin-informed targets and clean conversion value data handle changes like this well. Accounts with one catch-all Performance Max campaign, a historic ROAS target and no exclusions absorb the cost through lower blended profitability.
The immediate takeaway is to audit every budget-limited target CPA and target ROAS campaign before the target-based bidding update reaches your reporting window. Where automation, tracking or campaign structure is affecting performance, this is exactly the sort of issue we surface in a free Google Ads audit.
If you need help separating growth opportunity from margin leakage, our Google Ads agency team deals with this kind of Smart Bidding control every week. The fix is not to distrust automation. The fix is to stop feeding automation lazy targets.
What advertisers should do next
Start with a campaign export, not the Recommendations tab. Pull every campaign with a bid strategy type of Target CPA or Target ROAS and a status showing Limited by budget. Split them by campaign type, because the action for Search usually differs from Performance Max or Shopping.
- Compare target against actual performance over 90 days. For target CPA campaigns, calculate the gap between actual CPA and target CPA. For target ROAS campaigns, compare actual ROAS with target ROAS. Any campaign beating target by a wide margin needs a decision, not a pat on the back.
- Replace placeholder targets with commercial targets. For ecommerce, build target ROAS from contribution margin. Include product cost, delivery subsidy, returns, discounts, payment fees and VAT treatment where relevant. If the target does not protect profit, Smart Bidding will not protect it for you.
- Segment Performance Max by margin and intent. Do not leave high-margin accessories, low-margin hero products and clearance stock in one asset group structure with one blended target. Break out product sets where the acceptable ROAS differs materially.
- Decide the route for each capped campaign. Reset the target to recent actual performance if you want to preserve efficiency. Raise budget only where the stated target is genuinely profitable. Accept drift only where extra volume at the target improves contribution, not just revenue.
- Check conversion value quality before changing bids. If refunds, cancelled orders or offline margin adjustments never feed back into Google Ads, your ROAS target is built on inflated value. Fix value rules, enhanced conversions or offline imports before giving Smart Bidding more room.
Use the Bid Target Adjustment Tool only after you have done the commercial work. Applying recent performance as the new target is useful when recent performance reflects the efficiency you want to keep. It is dangerous when the last 90 days include sale periods, stock gaps or tracking errors.
The original report on the Google Ads target-based bidding update sets out the August rollout and affected campaign types. For the mechanics behind the strategies involved, keep Google’s own guidance on Target ROAS bidding for ecommerce and Target CPA Smart Bidding strategy beside your audit.
Brief whoever owns the P and L before the numbers move. Send a short note showing which campaigns are exposed, what their current actual CPA or ROAS is, what the account target says, and what action you are taking. That prevents a predictable Smart Bidding change becoming a surprise performance issue at month end.
What this means for your campaigns
The target-based bidding update turns passive targets into active commercial instructions. That is good for advertisers who know their economics and bad for advertisers who let Smart Bidding settings drift. The accounts most exposed are not poorly managed in an obvious way. They are the ones where performance looked strong enough that nobody questioned the target.
For ecommerce, the answer is not to slash budgets or panic-change every bid strategy. The answer is to make every CPA and ROAS target honest. If the campaign has been beating target and you want to keep that efficiency, reset the target. If the campaign has room to scale profitably, fund it with intent. If the data is dirty, fix tracking before you invite automation to spend harder.
The advertisers who win from this change will be the ones who turn target-setting into a finance-led discipline, not a platform habit.
If you’d like a second pair of eyes on how this affects your account, our team offers a free Google Ads audit, with no strings. Google’s overview of how Smart Bidding works is worth a read before you touch any targets.
Frequently asked questions
What is Google’s target-based bidding update?
It is a Google Ads change that makes budget-limited campaigns using target CPA or target ROAS deliver closer to the target set in the account. For ecommerce advertisers, that means old CPA and ROAS targets will matter more.
Which campaign types are affected?
The update applies to target-based campaigns across Search, Shopping, Performance Max, Demand Gen, Travel and Display. App campaigns, Video reach campaigns and Video view campaigns are excluded.
Will Google automatically increase my budget?
No. Google is not raising budgets automatically. The issue is that the system will use the existing CPA or ROAS target more directly, so a loose target creates room for higher costs or lower ROAS inside the available budget.
What should ecommerce advertisers check first?
Export every campaign marked Limited by budget using target CPA or target ROAS. Compare the target with actual performance over the last 90 days, then reset targets where you need to protect current efficiency.
Should I raise budgets before the update?
Raise budgets only where the stated target reflects real profitability. If the target is a placeholder, increasing budget simply gives Smart Bidding more room to buy less profitable conversions.
