These are the questions that businesses ask themselves:
How much do ad campaigns cost on Google ads? How much money should we invest to get results? Is it worth it to advertise on Google?
To all these questions, there is not an absolute answer.
The reply is: “It depends”.
The cost of a campaign on Google Ads depends on multiple variables. In this article, we’ll go through all these factors to get an overview about the cost of Google Ads, which ads you can create and the cost per campaign.
How can you know what’s the optimal budget to invest in campaigns on Google Ads?
First, we must understand the variables that influence the investment decision in Google Ads.
What’s Google Ads charging system?
Google Ads uses an auction system that rewards ad campaigns with a higher quality, bid and the ad extensions and other ad formats.
Do you still have some questions?
This scoring system is calculated by multiplying the maximum bid (what you are willing to invest for one click) and the quality of an ad.
3 people are bidding for an ad, they decide how much to invest and this amount is multiplied by the quality of the ad.
The result of this formula will determine how each ad ranks:
Maximum bid X Quality Score = Ranking
Imaging the following case:
▶️ Advertiser 1: Bid amount $1 x Quality Score: 4 = 4
▶️ Advertiser 2: Bid amount $3 x Quality Score: 3 = 9
▶️ Advertiser 3: Bid amount $2.5 x Quality Score: 5 = 12.5
Google will first show the ad of advertiser 3, then the one of advertiser 2 and lastly, the ad of advertiser 1. If the result is too low, the ad might not even show at all.
In broad terms, the Quality Score is based on:
▶️ Click through rate
▶️ The relevance of the ad- That is, that the ad is related to the user’s search.
▶️ User experience on the landing page
▶️ Ad extensions included in the ad. – Call to action, highlighted text, URLs, etc.
Ad extensions improve the click through rate (CTR) that translates into: lower cost, more clicks and a higher quality of the ad. Besides, the bigger your ad is in mobile devices, the lower in the screen your competitors will appear.
Investing more money in Google Ads doesn’t mean that your ad will rank first. The Quality Score of your ad is vital to achieve this goal.
The average cost per click
This cost normally fluctuates between US$1 to US$2.
The most expensive keywords on Google Ads are related to legal or health terminology and they can be up to US$50.
Big corporations can make multi million investments. On the other hand, if we talk about small or medium companies, the average monthly investment is between US$1,000 to US$7,000.
However, after having analyzed how Google Ads work and concluded that its not necessarily true that the higher bid gets the best ranking, it’s time to ask ourselves the following question:
How much money do I have to invest in Google Ads to start seeing results?
You can choose amongst several options to calculate your investment in Google Ads.
OPTION 1: BEGINNERS
If it’s the first time that you are going to invest in a pay-per-click (PPC) ad and you’d like to test it, you should invest between US$200 and US$500 and distribute the budget in 30 days. Then you can analyze the outcome and find out how exactly works.
However, avoid periods of the year such as Black Friday or during Christmas campaigns season. Otherwise the results could be distorted to value whether your investment was worth it or not.
OPTION 2: ADVANCE
Carry out a thorough analysis of keywords and choose at least 10 keywords for which you want to bid.
The ideal is to use transactional words. Remember that you are here to do advertising.
Include works such as: price, buy, subscribe, cost…
Nobody knows better than yourself what your potential customers will probably look for.
Check the cost per click (CPC) for your selected keywords from Google Ads keyword planner
Then calculate the average CPC. For example: US$ 0.50
Now choose between these two options depending on the typology of your website
1. IIf your website has been around for sometime now and it’s functional: Get the conversion rate of your website, product or service that you want to promote.
For example: If you need 100 visits per 1 conversion, it’d involve a necessary investment of US$50 per conversion (US$0.50 x 100 = 50). So, 10 conversions would require a US$500 investment, 20 conversions US$1,000, etc.
2. If you’ve just launched your website: You can add up the average monthly searches of your selected keywords (for example, 1,000). Then, multiply that amount by the average CPC (US$0.50). The result would be US$500.
You must optimize your first ad campaigns while they last: Review the cost per click (CPC), including extensions, monitor the conversion rate, etc.
Isabel, this sounds good but…
How much does it cost to advertise on Google?
The investment in your ad campaigns on Google Ads will depend on the conversion rate and the typology of your business.
✅ If for each sale, your profit margin is US$1,000 and the cost to get 1 sale with Google ads is US$100, is it worth it?
✅ If for each sale your profit margin is US$200 and getting a sale with your ads costs US$190, is it still worth it?
Think about it…
There is not an absolute answer to the question: How much should we invest in Google Ads?
The cost of advertising on Google will depend on all these factors:
✅ The quality of your ad
✅ The number of leads
✅ The profit margin of your product or service.