65% of SMBs or small to midsized businesses will invest in PPC or pay per click advertising.
Most of them are wanting to direct ad spending to Google Ads (formerly Google AdWords). Even though Google Ads have an excellent ROI (return on investment) of $8 to each $1 spent, many businesses think about the cost of Google Ads and how much should be spent on it.
The average CPC (cost per click) for Google Ads is up to $2 on the Google Search Network and less than $1 on the Google Display Network. Normally, SMBs will spend around $10,000 each month on Google Ads, which will not include any additional costs, such as software.
If you are ready to learn more about the cost of Google Ads, how it works, and what you should spend, keep reading.
Google Ads Pricing Cheat Sheet
If you are in a bit of a rush, then use this cheat sheet to give you a quick summary of the costs for Google Ads.
The Cost of Google Ads
Most businesses can spend up to $10,000 each month for paid advertising, but the truth is that there is not a one size fits all type of answer for the most asked question for businesses. “How much does Google Ads cost?” The reason why is because Google Ads is entirely customizable for an ad platform.
You can completely control the expenditure and the time spent on it, and you can increase or decrease advertising expenditure in real-time as needed. Therefore, the pricing flexibility of Google Ads is one of its most significant advantages.
How much does the business spend on Google Ads?
Even though most companies spend between $9,000 and $10,000 per month on Google Ads, they use their advertising expenditures differently. Factors such as their industry, products, services, and competitors will affect their advertising costs on Google Ads.
To understand your industry, please review the following information about Google Ads’ CPC breakdown:
In most cases, industries with higher CPCs will spend more on Google Ads. For example, the consumer service industry pays nearly $7 per click on average, pushing companies in this industry to increase their monthly Google Ads spending.
The company may also need to pay additional Google Ads fees, including:
PPC management software
Companies can also use free and paid PPC software such as Shape, WordStream, or Acquisio) to simplify internal PPC management. Although these tools are optional, they can help your company optimize bids, evaluate ads, and more.
If you choose a paid PPC management tool, the price ranges from $15 to $800 per month.
Professional PPC management
When companies invest in PPC, it is not uncommon to cooperate with PPC agents. PPC agencies will develop, start, and manage your paid advertising campaigns on platforms such as Google Ads and Microsoft Advertising.
As part of leading and managing PPC campaigns, your PPC agency will charge a monthly management fee. The rate ranges from $350 to $5000 per month, excluding your monthly advertising spend.
In some cases, your agency’s management fees will be a percentage of your advertising spend.
For example, the average cost is 12% to 30% of the company’s advertising expenditure. Therefore, if you have $5,000 in advertising expenditure, and your agency needs 12% of monthly advertising expenditure as payment, in addition to spending $5,000 on advertising, you also need to pay the agency $600 per month.
Now that you have mastered the basics of Google Ads costs, are you ready to learn more about how much the platform and ad auction will affect your business? Just keep reading, and you can start!
What are Google Ads?
Google Ads (formerly known as Google AdWords) is Google’s PPC advertising platform.
You can use it to create ads, bid for specific keywords, and determine how much you are willing to pay for each click on the ad because Google Ads runs in real-time on the auction system.
When a user searches for a keyword of your choice, if your bid is higher than other advertisers’ bids for that keyword, your ad will be displayed at the top of the search results with a small label next to it, indicating that it is a paid result.
The best part of Google Ads is that you only pay when a user clicks on your ad. It doesn’t matter how often it is displayed or seen-you only pay when someone clicks and visits your website.
You can also set daily and monthly budgets by the campaign. Therefore, after you find the winning keywords to bid on and run the winning ads, you can let the campaign know that you will not exceed a specific budget and start running.
How does Google Ads work?
When studying the cost of Google Ads, you must understand how the platform works. This is because the design of Google’s auction system affects your Google Ads costs, and understanding that the system can help you set a realistic budget for your campaign.
Google Ads uses auction models to determine the location and cost of ads. When users search for products on Google, the ad auction begins. If the search query matches a keyword that the advertiser is actively bidding on, then eligible ads will be auctioned.
Inside of this auction, CPC and ad placement are determined by the Ad Rank. Your ad’s ad rank will be based on the quality score and the maximum bid on the keyword for your ad.
There is not much depth about the quality score (QS) for this post. However, as a brief overview, the QS for your ad will be determined by combining the click-through rate, quality of the landing page for users, and the keyword that triggered it. The click-through rate is how many times your site is shown versus how many people have clicked it.
The formula for Ad Ranks is simple. If you have a maximum bid for a specific keyword is $5, and there is a QS of 10, your ad rank will be 50. In a single auction, whoever has the highest ad rank will win the top advertising spot.
The ad rank is also how Google calculates how much you end up paying for each click. The formula for your CPC looks like this:
The main thing here is that you can spend less while still having a high ad position if you have a great QS.
Setting Realistic Budgets and Bidding on Google Ads
Now that you know how Google Ads work, you can see why the practical answer to how much Google ads cost is it depends. Whenever you advertise on Google Ads, you will have almost full control over your ad spending.
You will have full control over certain variables, such as the maximum CPC bid and your ad quality. However, there will be some factors that you have no control over, like the maximum CPC for your competitors and their ad quality.
However, all of that is in the ad auction. Before you can get to that point, you need to think about how competitive your niche is and how competitive your keywords will be for your niche. That is where you can be creative to keep all of your costs down.
If you work with law offices, and you are bidding on the keyword “attorneys.” That will be a highly competitive term and it will be searched a lot each month, which means that the CPC bid is going to be high.
If you want to keep your campaign as cheap as you can, then research keywords and come up with less expensive and less competitive keywords that you can bid on. You may even think about bidding on long-tail keywords such as “accident attorneys in Houston, TX” or something like that.
These keywords will lower the search volume and get you fewer clicks, but they will often be much cheaper than a competitive and broad keyword like accident attorneys. It can also link you to users who are looking for these services that you are offering.
Why You Should Advertise on Google Ads
Even though the pricing for Google Ads will vary and is based on your competitors, strategy, industry, and your business, the platform can offer plenty of advantages. If you are thinking about using Google Ads but are unsure if it is worth it, this breakdown of benefits can help you.
The reasons that you need to invest in Google Ads
Every single thing that you do with Google Ads is going to happen in real-time. It means that you can scale up once you found a successful campaign or scale down if you notice you are underperforming. You do not have a contract to worry about. You are not required to spend a certain amount each month, or anything like that.
The scaling potential is unlimited for Google Ads. If you have a specific campaign providing excellent results with you spending only $600 each month, you can increase that $600 to $6000 or more.
Most advertising channels have nothing compared to Google Ads when it comes to budget control. There is no minimum investment needed to create a Google Ads account or even run a campaign.
You could try a test campaign on a $3 per day budget if you wanted to. However, the results will depend on your niche and the keywords you are using, but the point is that you can decrease and increase your budget as needed.
You can have access to every piece of data about your campaign performance using Google Ads.
You will see how many times your ad was shown and how many people were converted when they clicked on it. Not to mention how many people clicked the ad, information about the user types clicking the ad, the time of day that your ad gets clicked the most, and so much more. The amount of information that you can get through Google Ads is impressive.
That stands out from other types of advertising channels.
A lot of traditional advertising forms like newspapers, radio, and tv have limited analytics. You have no idea how successful your campaign is because you have no idea how many people have taken action because of your ads or how many people have seen your ads.
Do You Need Help Creating a Budget for Google Ads?
Most businesses can spend between $9000 or more than $10,000 every month on Google Ads, but there is no single answer to how much you should pay for Google Ads, and there is a good reason for that. How much you spend is going to be up to you.
You may base your spending for your Google Ads through data-driven scaling decisions, or budget control, or more indirectly by how competitive your industry is and the ad performance you have. Everything comes down to what you want to do.
Either way, Google Ads is a great way to get your business out there. The worst case is that you spend a small budget on a flawed test campaign, but then you learn what to do to make it successful, and you will wonder why you did not use Google Ads sooner.