If you’re a newcomer to PPC advertising, then welcome along, where’ve you been?!Most likely you’ve been busy scouring the internet for answers to questions like this:How much does Google Ads cost?And with good reason…Because at the end of the day, it’s important to know how much of your marketing budget you’ll need to set aside for Google Ads and whether you can even afford to run a campaign in the first place.Luckily for you, you’ve made your way onto this blog post, so your question will soon be answered — sort of…We say that because there is no definitive response to the question ‘How much does Google Ads cost?’You see, one of the main strengths of Google’s advertising platform is its flexibility.This means there are many different variables at play that determine how much advertising on Google will cost you — making it impossible to give a one-size-fits-all answer.Sorry to burst your bubble so early on, but bear with us.The good news is that by the end of this blog you’ll get a pretty accurate understanding of how much Google Ads will cost you and your business.We’re going to look at things like key industry averages, what some of your biggest expenses will be and what you can do to tighten up those advertising purse strings of yours.So find yourself a trusty calculator and settle in, because we’re about to crunch some serious numbers!
What are the main costs involved in Google Ads?
Before you even start thinking about setting your ad budget, you need to know where your Google Ads dollars will be going.Let's quickly look at the main costs involved.
Ad spend
This is obviously where the bulk of your budget is going to go.Getting clicks on your ads is what it’s all about, so unsurprisingly this is your biggest advertising expenditure.But we can break it down a little further as your overall Google Ad spend will be made up of two components.
CPC (Google Search Network)
Firstly, ads that you choose to run on Google’s search networkThese are the ads that show up when you make a Google search and usually have a higher CPC than Google’s advertising sibling as users are searching with intent.Although you can end up paying a high CPC, the idea is that leads coming through search ads are qualified and more likely to buy or interact with your business.
CPC (Google Display Network)
If you decide to run display ads, they’ll be shown to users all over the internet, not in search results.These generally have a lower CPC than search ads but that’s because advertising on the display network generally yields lower conversion rates.So advertising on Google’s Display Network may be cheaper, but the likelihood is you won't get much value out of a budget display campaign.Still not sure about the difference between search and display ads? We have a blog post that goes into much more detail on this!
Professional Google Ads management
Now, if you’re serious about running a successful Google Ads campaign, or have too much on your plate to manage your campaign yourself, you can leave it to the experts.Putting your Google Ads in the hands of a PPC agency will obviously have a sizable impact on your budget, but the extra outlay should see an improvement in your ads performance — in theory at least.Find yourself a reputable agency with solid client reviews (like us 😊) and it’ll be money well spent.
PPC management tools
If you want to learn the ropes yourself, there are plenty of handy PPC management tools out there that’ll provide you with huge value as you find your feet.These require a lot less commitment than teaming up with an agency so are therefore way easier on the budget, though you will have to invest time when learning the different tools and programs.
How much does the average business spend on Google Ads?
Now you know what the main costs are when running a Google Ad campaign, it’s time to look at how much the average business spends.It’s always good to keep tabs on industry averages so you can get an idea of what your competitors are up to and whether you're spending too much or too little in comparison.These figures from WebFX give an excellent insight into what small-to-midsize companies can expect to spend on a monthly basis.
This should give you a rough idea of the numbers and figures involved when advertising on Google, but let’s get more granular.To get a better understanding of what your competitors and other businesses in your industry are spending on Google Ads, 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 length of time it takes you to turn a prospect into a customer will also play a big part in how much your Google Ads cost.Generally speaking, Google Ads for products or services that involve longer customer lifecycles will be more costly than those that require less commitment and decision making time.Let’s use the underwear example from earlier again. A prospect needs new underwear, they have a shop around online, see an ad they like, click on it and buy a new pair of underwear, simple.Compare that with a business owner who is in the market for new workforce management software.They’ll be a lot more likely to require multiple site visits, a content download and maybe even a demo before they commit to a purchase, and during all these stages Google Ads are required to convince the user to choose your product.
Current trends
Like all aspects of advertising, Google Ads is in a constant state of flux so it makes sense to stay on top of trends and what's happening around you.At the height of the pandemic for example, buying habits changed dramatically which had a huge knock-on effect on average CPCs and how advertisers approached their campaigns.Remember the whole toilet paper debacle? What a nightmare that was…
How do you pay for Google Ads?
As promised, we’re going to take a look into Google’s auction model. This will help you get a better understanding of the overall costs involved so you can begin setting your Google Ads budget.
Bidding
As we touched upon earlier, before your ads go live you have to bid on keywords that you want them to appear for when someone searches on Google.You do this by setting your maximum bid — the highest amount you’re willing to pay for your ad to appear, don’t worry though, you won't always pay that.As an example for this section, let's say you want your ad to rank for ‘window cleaning’ and you’re willing to pay $2 per click.Now let's break down the actual auction process in more detail so you can get a feel for how it actually works.
1. Auction starts
Unlike a property or car auction that requires a lot of planning and preparation, an ad auction is triggered the moment a user makes a Google search.Google then draws up a list of ads to serve up based on the keywords in the search query.In this case, when someone has searched for ‘window cleaning services Sydney.’
2. Google chooses the winners
After rounding up all the potential ads to show, Google will then rank them in order.This ad ranking process is calculated by multiplying an ad’s maximum bid by it’s quality score.Going back to our example, your maximum bid is $2 and let’s say, because you’ve been following along so closely, your ad has a quality score of 10.That would give you an ad rank of 20.Compare that to a competitor who is willing to bid $3 for a click on their ad, but has a quality score of just 5 — giving them an ad rank of 15.This would mean that despite being willing to pay more, your ad would rank first in the search results.Now you can start to see why advertising on Google isn’t all about having deep pockets and that making sure your ads are relevant and managed properly is just as important.
3. Cost per click
As we already know, you only pay for your ad if a user actually clicks on it, but how much?Google’s formula for calculating your CPC is this: the rank of the ad below yours, divided by your quality score, plus one cent.So using our example again: 15÷10=1.5, + 0.01 = $1.61, there we go!Even though you set a maximum of $2 per click, it worked out as less.Please note this is just an example and, as you can probably imagine, ad auctions are way more competitive in reality — unless you’re Chuck Norris.
How can you optimise your Google Ads to improve your ROAS?
Now that you know about all the different costs involved when running a Google Ads campaign and how the actual auction process works, how can you start lowering the amount you’re spending on your ads.Your return on ad spend, or ROAS, is important to keep track of because it shows you exactly how much bang for your back you’re getting.ROAS is your total revenue made from Google Ads, divided by your ad spend, and multiplied by 100.Let’s say you receive $2000 in revenue per week from your Google ads while spending $1000 running them.This would see a ROAS of 200% — which is also the overall ROAS average.So what can you do to increase that number?
Account management
Managing your Google Ads account is where almost all of the juicy improvements and optimisations can be made — and it’s where we like to really nerd out!To be honest, we could write an entire book about the different tips and tricks you can use to try and improve your ROAS, but we’ll stick to just a few top tips.
Top Tip #1: Targeting
Changing your targeting parameters is a great place to start tightening things up.If you think your CPC is too high, try refining your targeting by making your ads laser focused rather than casting such a wide net.
Top Tip #2: Negative keywords
Just like you want people to come across your ads if they search for a particular keyword, you also want to avoid your ads appearing in irrelevant searches.Identifying negative keywords that have nothing to do with your ad will help reduce the chances of unqualified leads clicking on your ads and draining your ad budget.
Top Tip #3: Test, test, test!
Even if your campaign is smashing it out the park, there is always the opportunity to test out new tactics to see if you can squeeze even more juice from your ads.From testing out different landing pages to playing around with your ad copy, there is always something you can do to try and improve your ROAS.
Now it's over to you...
Congratulations, you now know the ins and outs of how much Google Ads cost!You know all the key industry averages, the major costs involved and have some tips on how to improve your ROAS.It’s now time for you to get your campaign up and running and start making some optimisations to improve your ROAS.If you need a hand with either, we’re here to help.As a PPC agency, we handle campaigns for a whole book of clients that come in all different shapes and sizes.We stay on top of the latest trends and bidding strategies so you don’t have to, so get in touch with us today to speak to one of our PPC experts and claim your free proposal.
