“How much does Google advertising cost?” This is one of the most common questions that we get from new clients at Digital Logic. Of course, business owners who are new to pay-per-click (PPC) marketing are mainly interested in how much they’ll have to spend in order to advertise on Google search pages, and whether or not they can afford it. Unfortunately, this is not an easy question to answer, because the costs of Google Ads (previously known as Google AdWords) will be dependant on many different factors.
- How Does The Google Auction Work?
- How Is My Google Advertising Budget Spent?
- Google Search (PPC) Budgeting and Planning
- How Google Daily Ad Budgets Get Spent
- Google Ad Scheduling
- Geotargeting and Geofencing with Google
- How Much Should Small Businesses Spend On Google Ads?
How Does The Google Auction Work?
One of the biggest misconceptions about Google Ads is that the advertiser with the biggest budget will win all of the traffic. Although having a larger ad budget never hurts you, Google Ads is designed to be a level playing field.
Google Ads functions the same way as an auction or clearinghouse. For example with Google Search ads: the ad auction takes place when a user Types a search into the Google search bar. If an advertiser is bidding on the same keywords that are in a user’s search term, then an ad auction will take place behind the scenes to determine which ads will be served.
The auction works by determining your Google Ad Rank, or position each ad will be served. The auction will then determine the best placement for each ad according to the Ad Rank formula, which is based on two main factors: maximum bid and Google Quality Score.
We won’t dive into the specifics concerning Google Quality Scores, if you want to learn more about how Google Quality Score impacts your ads, we have a comprehensive guide on How Google quality score works.
After the advertisement’s Quality Score and Ad Rank have been determined, Google will then use this data to decide how much you’ll be paying each time that someone clicks on the ad.
How Is My Google Advertising Budget Spent?
One of the most common situations many new business owners find themselves in is that their advertising budget is spent more quickly than they anticipated. Business owners expect their ad budget to last all month, but quickly discover they’ve spent through their small ad budget in only a few days (or hours!).
This may lead to even more misunderstandings about how paid search actually works, specifically whether or not it’s actually too expensive for their needs. This isn’t necessarily true since more often than not this happens as a result of not knowing how PPC works. Budgets with Google are set with per day spending caps.
Google Search (PPC) Budgeting and Planning
You can think of your Google Advertising budget in the same way you’d consider any other type of marketing budget. You’ll want to start with a baseline figure to represent the majority of your ad budget, but plan for some leeway for if things change or anything goes wrong. A good place to start with determining your budget is to write a marketing plan, then take a look at the Google Keyword Planner.
An easy way to create a budget for a PPC account is to operate on a per-campaign basis. Since each ad campaign will have its own settings within Google Ads, this can allow you to control each of the parameters for the campaigns independently of one another in your account.
[Google Ads budget per keyword]
Each Google Ads campaign should have defined its own daily budget to make sure you are in control of the spending overall. If you plan on running many different campaigns at the same time, you’ll want to consider which campaigns have a priority to your bottom line to achieve a higher ROI.
If one of your campaigns advertises your best-selling product, then it should be prioritized over another campaign that focuses on promoting content to potential customers near the beginning of your sales funnel.
If you’re planning a monthly Google Ads budget, you should calculate the breakdown of daily budgets for each campaign separately, and then allocate your budget according to the priority of each campaign to your business goals.
How Google Daily Ad Budgets Get Spent
For example, you have a keyword with a CPC of $0.30, and that you want to receive 100 clicks per day on your ad. Using these figures, you can calculate an estimated daily budget: $0.30 x 100 = $30
Essentially, if you set your maximum CPC at 30 cents, then you won’t ever pay more than $0.30 for a click, but you could end up paying less depending on who else is advertising, or how high your Quality Score is in comparison.
Google Ad Scheduling
Also known as “dayparting,” ad scheduling allows you to specify which times you want your ads to be shown to search engine users. Even though your ads still have to go through the normal ad auction process, you can inform Google Ads which specific times you want to have your ads be displayed.
Scheduling can be very useful for local businesses who want to drive their prospective customers to a physical location with their ads. For example, if you run a doctor that closes at 5:00 PM, you probably won’t want your ads to be served outside of normal business hours to avoid not being able to appropriately handle potential clients and leads.
Additionally, you can also choose to have your ads run all throughout the day, but choose to allocate a larger portion of your daily budget during the hours which you’ll want increased visibility.
Geotargeting and Geofencing with Google
Just like you can allocate more of your Google Ads budget to within certain times of day, you’re also able to spend more of your budget within certain geographical areas, which is also known as geofencing.
Geotargeting can allow you to prioritize showing your ads to search queries from specific areas as large as a state or province, down to as small as a five-block radius around your business location.
Geotargeting is an excellent opportunity for capitalizing on increasing mobile traffic and the rapidly changing shopping habits of consumers, and might even play a factor in how you ultimately allocate your daily ad budget.
For instance, you might want your ads to only appear next to relevant searches within a particular state, but also allocate more of your ad budget to those searches which took place within a specific city or even a neighborhood.
You might be interested in this comprehensive guide we wrote on geofencing advertising.
Device Bid Adjustments
Prospective customers no longer exclusively search using desktop browsers. In fact, mobile traffic has exceeded desktop traffic as of 2016.
Consumers today are searching across numerous devices, which means that you’ll have to pay attention to where the most valuable leads are being sourced from, and device targeting can assist in further targeting to increase Google Advertising ROI.
In the instance where you’re getting more conversions (phone calls, form submissions or e-commerce transactions) from mobile devices, then you’d want to increase your bids on mobile. You can set these increases or decreases on each device using a percentage amount.
You might even want to move more of your budget to search traffic coming from specific mobile devices, depending on what your ad copy says.
By setting a specific daily budget and understanding how it will be spent, you’ll be covering the most important aspects of budgeting for PPC, and it does pay to be well aware of how advanced targeting options will affect your overall ad spend.
Google Ads Pricing: How Much Does Each Click Cost On Google Ads?
After you understand what PPC is and how paid search marketing works, you may also wonder, “How much does each click cost on Google Ads?” Again, this question does not have a simple answer.
In some cases, it might be best to think of PPC advertising along the same lines as traditional print advertising. You’d reasonably expect to spend more of your budget on a glossy full-page advertisement in a niche magazine than you would for a classified ad in your local newspaper.
In digital marketing, it’s more about the commercial intent and competition for your targeted keywords than the format of the ad. Some keywords will be significantly more expensive to bid on than others, mostly dependent on how many competitors the market has for those terms, and it’s important to realize this before you launch your new PPC campaign.
In the United States search market, if you combine all categories of businesses and keywords, the average CPC within Google Ads is somewhere between $1 and $100 on the Google Search Network, while on the display network, clicks tend to be cheaper, averaging just under $1 per click.
Inexperienced advertisers sometimes point to the high-cost keyword categories as an example of how expensive PPC can be.
The reality is that some keyword categories only make up a small portion of all searches on Google, and what are known as “long-tail keywords” actually make up the majority when combined.
Long-tail keyword targeting presents many opportunities to advertisers, and are also often significantly cheaper than bidding on the shorter keyword queries that have as much, if not more, commercial intent.
Instead of bidding on “personal injury lawyer in Houston,” you could advertise for long-tail keywords like “dog bite lawyer in Houston” and “oilfield injury lawyer in Houston,” which should both be significantly cheaper as they’ll have fewer competitors, and together, likely amount to more ad clicks for a lower cost.
How Much Should Small Businesses Spend On Google Ads?
As you might expect, the amount that our small business clients spend on Google Ads varies based on a number of factors. Some clients might only spend $1,000 each month, while others might be spending upwards of $30,000 per month.
It all depends on how important Google Ads is to the overall marketing plan you’ve developed, and what the size of your monthly budget is for marketing expenses.
Your Google Advertising budget will most likely be your largest, most direct cost associated with PPC campaigns since they are the biggest search engine and competition is highest on their platform.
Google Advertising and Agency Costs
Many small business owners choose to hire a marketing agency to manage their Google Ads work for them.
Marketing agencies should be able to apply years of experience in PPC account management to make themselves trustworthy partners who offer your business expert advice and guidance with Google Advertising.
Marketing agencies will typically ask for a percentage of your overall ad spend, regardless of the ROI, while other agencies might guarantee a threshold ROI.
Agency PPC management fees are generally between 10% – 25% depending on ad spend. National marketing providers and traditional media companies (newspapers, TV stations, radio) often bake in their margin to the monthly budget which can be anywhere from 30% to 60%. It’s important that whoever you work with is transparent with their fees.