If you’re new to PPC advertising, welcome. Where have you been?
Chances are you’ve been busy trawling the internet for answers to questions like, “How much does Google Ads actually cost?” And fair enough. Before you commit any budget, you want to know what you’re getting into and whether it’s even realistic for your business.
You’ve landed in the right place. Your question is about to be answered. Well, sort of.
The truth is, there is no single, fixed answer to “How much does Google Ads cost?” One of the biggest strengths of Google’s ad platform is how flexible it is. And that flexibility means there are a lot of moving parts that influence what you end up paying.
So there is no one-size-fits-all number. Sorry to burst the bubble so early.
The good news is that by the end of this guide, you’ll have a much clearer idea of what Google Ads could cost for your business. We’ll walk through industry averages, where most of your budget actually goes, and what you can do to keep costs under control.
So grab a calculator and settle in. We’re about to crunch some numbers.
What are the main costs involved in Google Ads?
Before you even think about setting a budget, it helps to know where your Google Ads spend actually goes. Let’s run through the main costs.
Ad spend
This is where most of your budget will go.
At the end of the day, Google Ads is about paying for clicks, so your ad spend will always be your biggest expense. That spend usually falls into two main buckets.
CPC on the Google Search Network
These are the ads that appear when someone actively searches on Google.
Search ads generally have a higher cost per click because users are showing clear intent. They are actively looking for something, which usually means leads from search ads are more qualified and more likely to convert.
You might pay more per click, but the trade-off is stronger lead quality.
CPC on the Google Display Network
Display ads show across websites, apps, and YouTube rather than in search results.
They usually have a lower cost per click, but they also tend to convert at lower rates. That is why display campaigns are often used more for brand awareness than direct lead generation.
So while display clicks are cheaper, they often deliver less immediate value than search.
Not sure about the difference between search and display? We have a full guide that breaks it down.
Professional Google Ads management
If you want to take your campaigns seriously, or you simply do not have the time to manage them yourself, working with a PPC agency can be a smart move.
Yes, this adds to your budget. But in return, you are paying for strategy, testing, optimisation, and ongoing performance improvements. With the right agency, that extra investment often pays for itself in stronger results.
PPC management tools
If you prefer to run ads yourself, there are plenty of PPC tools that can help you along the way.
These usually cost far less than an agency, but they do require your time. You will need to learn the platforms, analyse the data, and make regular changes to keep things moving in the right direction.
How much does the average business spend on Google Ads?
Now that you know where your Google Ads budget actually goes, it is time to look at how much the average business spends.
Keeping an eye on industry averages is useful because it gives you a benchmark. You can see what businesses similar to yours are spending and whether your own budget looks too high, too low, or about right.
These figures from WebFX give a good snapshot of what small to mid-sized businesses typically spend each month.
This should give you a rough idea of the kind of numbers involved when advertising on Google, but let’s take it a step further.
To get a clearer picture of what businesses in your industry and your direct competitors are actually spending, we need to zoom in a little closer.
The graphic above from WordStream shows the CPC industry averages (in USD) for Google Ads on both the display and search networks. This goes to show that the industry you’re in has a big part to play in how much you’re going to spend on Google Ads, but it’s not the only factor…
What factors affect the cost of Google Ads?
It’s important to know the different factors that affect the cost of Google Ads because you may realise that — actually —there are better advertising avenues for your business to explore.Similarly, it might be the case that after reading this blog post, you feel there is a massive opportunity for you to exploit — either way, knowing what will affect your budget is vital.
Industry
As we just established, the biggest variable is going to be what industry your business is in, as some are way more competitive than others.For example, as you can see from the chart above, the industry with highest CPC on Google’s Search Network is legal services, whereas ecommerce is amongst the lowest.Which makes sense, right?A new client is most likely going to be more valuable to a law firm than to an ecommerce store that sells underwear — no matter how nice and comfy their undies are.
Keywords
This kinda ties into the industry you’re competing in. As Google uses an auction model for its ad platform, you have to bid on keywords that you want your ads to appear for — don’t worry, we’ll go into more detail on this shortly. So let’s say you’re a criminal law firm looking to generate leads. As we’ve already established, the CPC is going to be on the higher end of the scale, therefore it’s important to ensure the clicks that come through are from potential clients and not people searching for something completely different. Rather than bidding on highly competitive and pricey short tail keywords like ‘lawyer’, you’d be better off bidding on longer tail keywords such as ‘criminal defence lawyer near me’ or ‘money laundering lawyer’ for more targeted, cost-effective results.
Quality score
Google gives a quality score based on the overall user experience of your ads in relation to the keyword the user searched for. Each ad is given a score on a scale of 1-10 — just like in old school diving competitions — the higher the score, the higher it’ll rank and the lower you’ll pay at auction. Your ad’s quality score is affected by three things:
1. Ad relevancee
Is your ad actually relevant to the keywords you’re bidding on? If your defence lawyer ad is being shown to aspiring soccer coaches looking to brush up on their defending, then your quality score is going to take a hit.
2. Landing page experience
Is the page you’re driving users to closely related to what you’re offering in your Google Ad? It’s no good selling a dream in your ad if it has nothing to do with your actual offer after a user clicks through — and Google will make that clear.
3. Expected click through rate
This figure just represents the likelihood of a user clicking on your ad when Google shows it based on the keyword searched for — no clicks = low score. As you’ll soon find out, your ad’s quality score can have a seriously important part to play and enables smaller advertisers to compete with the big boys.
Customer lifecycle
The amount of time it takes to turn a prospect into a customer can have a big impact on how much your Google Ads end up costing.
Generally speaking, products or services with a longer buying cycle tend to cost more to advertise. That is because it usually takes more touchpoints, more clicks, and more nurturing before someone is ready to commit.
Take the underwear example again. Someone realises they need new underwear, has a quick look online, clicks an ad they like, and makes a purchase. Simple.
Now compare that to a business owner looking for workforce management software. They are far more likely to visit your site multiple times, download content, maybe book a demo, and take their time before making a decision. All of those steps often involve paid ads, which pushes your overall cost higher.
Current trends
Like any advertising platform, Google Ads is constantly changing. Staying aware of market trends and shifts in behaviour can make a big difference to your results and your costs.
A good example is the pandemic, when buying habits changed almost overnight. That had a huge impact on average CPCs and how advertisers approached their campaigns.
And who could forget the toilet paper shortage. That was a wild time.
How do you pay for Google Ads?
As promised, let’s take a closer look at how Google’s auction system actually works. This will help you understand where your costs really come from and how to start setting a realistic Google Ads budget.
Bidding
Before your ads can go live, you need to bid on the keywords you want to show up for in Google searches.
You do this by setting a maximum bid, which is the highest amount you are willing to pay for a click. The good news is that you will not always pay that full amount.
For example, let’s say you want your ad to show for “window cleaning” and you are willing to pay $2 per click.
Now let’s walk through how the auction works.
1. The auction starts
Unlike traditional auctions that require planning and setup, Google runs an auction instantly every time someone performs a search.
When someone searches for “window cleaning services Sydney,” Google pulls together all the ads that are eligible to appear for that search.
2. Google chooses the winners
Once all eligible ads are gathered, Google ranks them.
Your ad rank is calculated by multiplying your maximum bid by your quality score.
So if your maximum bid is $2 and your quality score is 10, your ad rank would be 20.
Now compare that to a competitor who is willing to bid $3 but has a quality score of 5. Their ad rank would be 15.
Even though they are bidding more, your ad would appear above theirs.
This is why Google Ads is not just about having the biggest budget. How relevant and well-optimised your ads are plays a huge role in how well you perform.
3. Cost per click
You only pay when someone actually clicks your ad. But how much do you pay?
Google works this out using a simple formula:
(The ad rank of the competitor below you ÷ your quality score) + $0.01
Using our example:
15 ÷ 10 = 1.5
Add one cent and your actual cost per click becomes $1.61
So even though you were willing to pay up to $2 per click, you ended up paying less.
Keep in mind this is just a simplified example. Real auctions are far more competitive. Unless you are Chuck Norris.
How can you optimise your Google Ads to improve your ROAS?
Now that you know how Google Ads costs work and how the auction system actually runs, the next step is figuring out how to lower your spend and get more out of every dollar.
Your return on ad spend, or ROAS, is one of the most important numbers to watch. It shows you how much return you are getting for what you are spending.
ROAS is calculated by taking your total revenue from Google Ads, dividing it by your ad spend, and multiplying by 100.
For example, if you make $2,000 per week from Google Ads and spend $1,000 running them, your ROAS would be 200%. That is considered around the industry average.
So how do you push that number higher?
Account management
This is where most of the real gains are made. Good account management is where the testing, refining and performance improvements happen. It is also where we like to nerd out.
There are countless ways to improve ROAS, but here are a few of the most effective places to start.
Top tip #1: Targeting
Refining your targeting is one of the fastest ways to tighten up your campaigns.
If your cost per click feels too high, look at narrowing your audience and focusing your ads more tightly around the people most likely to convert, rather than casting a wide net.
Top tip #2: Negative keywords
Just as important as choosing the right keywords is excluding the wrong ones.
Negative keywords stop your ads from showing for irrelevant searches, which reduces wasted clicks and protects your budget from people who were never going to convert anyway.
Top tip #3: Test, test, test
Even if your campaigns are performing well, there is always room to improve.
Test new ad copy, landing pages, offers, and targeting variations. Small changes can lead to big lifts in performance, and there is always more juice to squeeze if you keep testing.
Now it's over to you...
You’ve got a solid understanding of what Google Ads costs, what the main expenses are, and how to improve your return on ad spend.
The next step is getting your campaigns live and starting to make smart optimisations that push your ROAS in the right direction.
And if you want a hand along the way, we’re here to help.
As a PPC agency, we manage campaigns for businesses of all shapes and sizes. We stay on top of the latest trends, strategies, and bidding changes so you do not have to.
Get in touch today to speak with one of our PPC specialists and claim your free proposal.
