Everyone keeps asking me the same thing when I recommend business owners invest in PPC advertising:
How much do Google Ads cost?
My answer is always the same. It depends.
The truth is that the cost of Google Ads can vary greatly depending on your industry and strategy. Some companies can be competitive on a budget as low as a few hundred dollars a month. Others have to spend thousands of dollars to get results.
With this article, I am not trying to give you a definitive answer on how much Google Ads are costing your business because there is simply no answer. Instead, my goal is to explain:
- how Google calculates the cost of ads
- the factors that affect the cost of ads
- How to Quickly Find Out How Much Keywords Cost
- This is how you reduce your advertising expenditure and remain competitive at the same time
Ready to dig into the cost of Google Ads and how to get the most from your budget? Let's start then.
How does Google calculate ad costs?
Google doesn't set a cost for every ad. Rather, an auction model is used in which companies bid on every keyword.
That means there are millions of auctions going on on Google every minute.
It also means that pricing is fluid based on how much competition you have and how much those competitors are willing to pay. Price fluctuations are not uncommon as demand rises and falls.
You don't need a big budget to keep up, however. Google offers a fair playing field that can enable the Davids of this world to compete with the Goliaths. The platform's formula for serving ads (Ad Rank) depends on two factors: the Quality Score of your ad and your maximum bid.
What are your Ad Quality Score and Max Bid?
The winning bid is the highest amount you will pay for each click on your ad. You specify this when creating campaigns and can edit them at any time. The maximum amount you want to bid may favor big brands, but the Quality Score allows anyone to hold their own.
Google uses various factors to calculate the Quality Score of an ad, including relevance for the keyword in question, the click-through rate (CTR) of the ad, and Google's assessment of the page.
How does ad rank work?
Google uses the following formula to calculate ad ranks:
Ad Rank = (Maximum Bid) x (Ad QA)
If your max bid is $ 5 and you have a Quality Score of 6, your Ad Rank is 30 (5 × 6). The ad with the highest ad ranking takes first place. The ad with the second highest ranking takes second place, and so on.
Google also uses ad rank to calculate how much you pay for each click:
Ad Cost = (Ad Rank of Ad Below) / (Your QA) + $ 0.01
As you can see, it is worth having a very high score.
6 factors influencing the cost of Google ads
Several factors affect how Quality Scores and Ad Ranks are calculated, and how much you pay. Here are the main ones you need to know.
1. Ad type
Google offers different types of ads, each with different average CPCs.
- Search ads: Most popular Google ads and those with the highest average CPC
- Shopping ads: Now free to most advertisers. They can be expensive depending on the products you sell
- Show ads in the network: The cheapest and least effective form of Google advertising
2. Time schedule
The length of time you schedule your ads to show can have a significant impact on the cost of your ads.
If everyone in your industry wants to advertise to consumers in the same amount of time, the competition is fierce and advertising costs rise.
Advertising outside of the busy times can put a further strain on your budget. However, you should keep an eye on the data about when your customers click. There's no point in running ads that no one sees.
3. Device targeting
Some keywords cost more when you target one device over another. B2C keywords are likely to cost more when targeting mobile devices, and B2B keywords are likely to be more expensive for desktops.
4. Bid strategy
Advertisers can choose from eight types of automated or intelligent bid strategies on Google. Each has different goals and can affect the cost of your ads in different ways.
Google uses machine learning to streamline the bidding process and automatically raise and lower bids to achieve one of four desired outcomes:
- Improved CPC to maximize conversion value
- Target CPA to meet preset target costs per action
- Target ROAS to achieve a preset target return on ad spend
- Maximize conversions to get as many conversions as possible
Maximizing conversions is usually more expensive than achieving a target CPA or an advanced CPC.
Google will try to send as many people to your site as possible and thereby bill you more.
Improved cost-per-click (ECPC)
Google automatically adjusts manual bids to get more conversions while maintaining the cost per conversion. You could pay more per bid, but your ROI should be consistent.
Google will maximize the number of conversions your ad budget can generate. This can lead to a higher CPC.
Target costs per acquisition
Pick a CPA and Google will try to get as many conversions as possible. This is a great option for controlling your ad spend. However, sometimes Google offers more than your target CPA.
Target return on ad spend
You set a target revenue for your ads to generate and Google will adjust the bids automatically. This strategy gives you better control over your ROI.
Location of the destination search page
Google adjusts your bids so that they automatically appear on the first page of Google or in one of the top positions. This will also cost more.
Target outranking percentage
Select another advertiser's website that you want to outperform. Google will adjust your bids to make this possible.
If there is one factor that determines the cost of your Google ads more than any other, it is your industry. The more competition there is for high quality clicks, the higher the costs.
Law, insurance, gambling, and finance, for example, are notorious for their high CPCs. Some keywords can cost over $ 100 per click. But they tend to generate a lot of income for businesses when they convert.
There is not much you can do to cut those costs down when you're in one of these high-demand companies except by using less-in-demand keywords. Ultimately, the choice of how to use PPC on Google is up to you and your budget.
So far, we've assessed the cost of ads based on the cost Google calculated for each click. But there is another point of view.
Rather than focusing on the cost of the ad in isolation, we can consider all of the resulting revenue.
For example, let's say your ads take people to a landing page where they can sign up for a trial of your product. A certain number of people who click on your ad will sign up for a trial, and some will pay for your product after the trial.
If the revenue generated by the people who pay for your product is more than the total cost of your Google ads, you've made a return on your investment. Google ads don't cost you anything.
There are several things you can do to improve your ROI, including:
- Lower your CPCs
- Increase the conversion rate of your landing page
- create new offers
- Improve your sales process
The more people you convert and the less it costs to buy, the higher your ROI.
The cost forecast is complicated. Use Ubersuggest instead.
With so many factors to consider, it can be impossible to get a rough idea of what a Google ad will cost.
Ubersuggest is a quick way to get an idea of how much a Google ad will cost for a keyword.
Let's imagine we're creating an ad for the keyword "digital marketing". We'll start by typing it into the search bar.
After you hit the search button, the next page shows the keyword's search volume, how difficult it is to rate it organically, how difficult it will be to run your paid ad, and estimated CPC.
You can find out the estimated CPCs of other related keywords by clicking the Keyword Ideas button on the left sidebar.
This will bring up a list of related keywords that you can sort by CPC.
You can also download the free Chrome extension to view keyword data right in Google SERPs.
How to reduce advertising expenditure
Now that you understand how Google determines ad costs, what factors affect those costs, and how to estimate the price of a keyword, it's time to see how you can keep your ad spend down.
Create a daily budget
One of the main reasons companies consider Google Ads expensive is that it's all too easy to blow your monthly budget in a matter of days. Solve this problem by setting daily budget limits. This will ensure that your budget is evenly distributed throughout the month.
Geotarget your ads
Make sure you only run ads for your target audience. While it makes sense for ecommerce stores to advertise to consumers across the country, local businesses don't. Geolocating ads can help you ensure that you don't waste ad spend on people who never become customers.
Add negative keywords
You could be wasting money on irrelevant keywords. That's why Google offers the Negative Keywords tool that businesses can use to remove keywords that they don't want their ads to relate to.
If you make the most of this tool, you can potentially reduce your overall advertising spend and improve the quality of access to your landing pages. For more information, see my negative keywords guide.
Increase your quality factor
Your quality score is important. If your score is high, your cost is likely to be lower than your competitor's.
Imagine you have a Quality Score of six and your competitor has an Ad Rank of 42.
Ad cost = (42/6) + $ 0.01 = $ 7.01
Let's see what the cost is if you have an Ad Rank of 8.
Ad cost = (42/8) + $ 0.01 = $ 5.26
That's almost $ 2 saved on every click. If you get 100 clicks every day, that's $ 200 a day.
Work with an agency
It might seem counterintuitive to spend money on a digital marketing agency when you're trying to cut down on your Google ad spend, but listen to me.
A digital marketing agency can use all of the tactics outlined above (and many more) to cut costs and significantly improve the ROI of your advertising campaign. At the same time, you can focus on bigger problems.
The easiest way to find out how much Google Ads are cost is to use Ubersuggest, which shows the average CPC of a given keyword.
Keep costs down by creating the most relevant ads and landing pages possible. Then use the following strategies to limit your ad spend:
- Create a daily budget
- Implement geotargeting
- Use negative keywords
- Increase your quality factor
Just make sure your ads are getting a positive ROI no matter how much you spend on them.
How much do you currently spend on Google Ads? Let me know in the comments!
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