June 30, 2023
Get the most out of your budget by understanding all factors affecting Google Ads costs and how to lower your cost per click.
Wondering how much Google Ads cost? Chat to a Google Ads Agency or keep reading.
No matter the size of your business, it can be tricky to figure out the cost of a Google Ads campaign if you’re new to paid search marketing.
This year, companies like yours will typically spend between $9,000 to over $30,000 per month on Google Ads. For this budget, they will receive from 4,500 to 30,000 clicks per month on average as Google Ads maintains its average cost per click of around $1 - $2.
So, how can you confirm the best budget to put into Google Ads? Let’s take a look. And, perhaps more importantly, we’ll also take a look at how you can better understand all the factors that will influence your total Google Ads cost, so you can get better results for a lower spend.
This is an in-depth guide packed with loads of insights. But if you’re in a hurry, here’s a quick summary of Google Ads costs.
Google Ad costs vary from business to business and depend on factors such as the industry you’re in, the number of people searching, the level of competition and the types of ad campaigns you create. You can expect to pay an average of $1 - $2 per click, however, if you’re in a very competitive industry, B2B or a more targeted niche, you may need to budget for higher costs to acquire profitable leads.
We’ll explore how all of these factors affect Google ads costs later in the article.
What other costs go into my Google Ads budget?
The costs that go into running a Google Ads campaign will depend on whether you’re doing things in-house or if you’re using professional services. Typically, you can anticipate the following types of expenses to be included in your Google Ads budget.
[td]Minimum recommended: $1,000 per month[/td]
[td]Cost per Click[/td]
[td]Average of $1 - $2/click[br/]So for a $1,000 spend, you might get 500-1,000 clicks.[/td]
[td]Agency Costs (For Professional Ads Management)[/td]
[td]12-30% of your ad spend on average. This cost is in addition to your spend.[/td]
Google Ads, previously known as Google Adwords, is Google’s paid advertising tool suite. You can use it to create ads that will display within Google search results or across the Google display network. All aspects of running your ads can be managed in your Google Ads account.
Unlike social media ads, you can use the Google Ads network to bid on specific keywords. It works a bit like an auction system where you can bid as much as you like for the terms you’d like to rank the highest. The Google Ads auction system runs in real-time and if your bid is higher than the other advertisers bidding on the same keyword, your ad will show at the top of the search results.
As far as calculating costs, this bidding system makes it a little challenging to predict exactly how much you’ll need to spend to run a competitive ads campaign. It’s worth noting that you only pay for every click your ads generate. It doesn’t matter how many people see your ad without clicking.
You can also set daily and monthly budget limits so you don’t accidentally go over your budget. The great thing is that you can adjust these limits according to your campaigns.
There isn’t an exact answer to the question of how much Google Ads will cost your business. It depends on the available budget you can invest and how your bidding strategy makes use of that budget.
On average, most businesses invest between $9,000 to $30,000 per month on paid ads. In Australia, the average spend is about half as much.
So if you want to be the market leader, investing more than your competitors may allow you to outbid them on the most competitive (and expensive) keywords. Alternatively, you can spend some time in the early stages of setting up your campaign to find the best-performing bidding strategy for your business. Doing so will allow you to make each dollar you spend go further.
Apart from your bidding strategy, factors like the industry you're in, the customer lifecycle, current trends and demand, and how well your campaigns are structured affect the cost of your Google Ads campaign. Let’s take a look at each of these.
The industry you're in plays a significant role in determining the cost of your Google Ads campaign. Certain industries, such as legal, finance, and insurance, are highly competitive, making it expensive to run ads. The high cost of running ads in these industries is because of the high value of the services they offer and the fact that many businesses are bidding on the same keywords.
[feature_link]Read more here about Google Ads industry benchmarks from Wordstream.[/feature_link]
Now it’s all well and good to consider your initial costs at face value, but for many businesses, the value of a click is better determined when you consider the customer’s lifetime value and where they are in their buying journey. For businesses with a higher chance of repeat sales, your customer lifecycle means that an initial click is worth more to you.
If you're targeting customers who are at the top of the funnel, you'll likely pay less per click. However, if you're targeting customers who are at the bottom of the funnel, such as those who are ready to make a purchase, you'll likely pay more per click.
And if you’re targeting customers who are at the bottom of the funnel and more likely to spend with you again, then it’s worth paying a little extra to win the bid and secure their click.
Understanding where your customers are in their journey and their lifetime value can help you plan your budget and bidding strategy effectively. Our proprietary platform allows our clients to uncover their most profitable audience segments and the ads strategies that work best for them.
In the case of Policrete, over the course of a year, we were able to hone in on the most profitable audience segments through search, allowing the client to repurpose 72.22% of their ad budget into other marketing channels. Despite such a big reduction in their ad spend, we delivered more of the right leads per dollar so it cost them $34.52 less to reach their ideal target customer.
In this case, a reduction of leads was also welcomed as we were also able to weed out any tire kickers who take up their sales team’s valuable time. All in all, by reaching the most profitable audience segments who are ready to buy, you can save a lot of money with your Google Ads.
The current trends and demand for your product or service also impact the cost of your Google Ads campaign. If your product or service is in high demand, you'll likely pay more per click because there will be more competition. On the other hand, if the demand for your product or service is low, you'll likely pay less per click because there will be less competition.
It's essential to keep an eye on current trends and demand for your product or service to ensure that you're adjusting your budget and bidding strategy accordingly.
For all of our clients that offer seasonal products or services, we play to the market and help them outrank their competitor’s ads with a smart bidding strategy. Sure, you can throw more money at your ad campaigns and dominate by spending (and wasting) a lot of money.
But there’s a smarter way to do it.
We use our proprietary platform and the data we collect to inform the best keywords to bid on at the right time. No matter how many others flood the market during peak times, we’re able to outperform them using data and the trained eye of a skilled Google Ads specialist, our very own Drew Gordon.
By now, it is abundantly clear that how well your campaigns are structured will play a major role in the total cost of your Google Ads campaign. A well-structured campaign will lead to a higher Quality Score, which, as we've discussed, can lower the cost of your ads.
At a surface level, a well-structured campaign includes targeted keywords, compelling ad copy, and relevant landing pages. If your campaigns are poorly structured, you'll likely pay more per click, and your ads won't perform as well.
But there’s more to it than that. Here are some additional techniques to consider for your ad campaigns.
Dayparting is a Google Ads feature that allows you to specify the times of the day when your ads will appear. This can be useful if you want to target customers during specific times of the day when they're most likely to convert.
For example, if you're running an eCommerce store that sells coffee, you may want to show your ads during the morning hours when people are most likely to be searching for coffee.
By using dayparting, you can improve your campaign's performance by ensuring that your ads are being shown when your target audience is most likely to be searching for your product or service.
Geotargeting is another useful Google Ads feature that allows you to target customers based on their location. With geotargeting, you can specify the cities, regions, or countries where you want your ads to be shown.
This can be useful if you have a brick-and-mortar store and want to target customers who are within a certain distance from your store. Or, if you're running an online store, you can target customers in specific regions or countries where you know there is a high demand for your product or service.
Geotargeting can help you improve your campaign's performance by ensuring that your ads are being shown to the right audience in the right location.
Device targeting is a Google Ads feature that allows you to target customers based on the device they're using to search. With device targeting, you can specify whether you want your ads to be shown on desktop, mobile, or tablet devices.
This can be useful if you know that your target audience is more likely to be using a specific device to search. For example, if you're targeting a younger audience, you may want to focus on mobile devices as they're more likely to be using their smartphones to search.
Device targeting can help you improve your campaign's performance by ensuring that your ads are being shown on the right device to the right audience. By using device targeting, you can also optimise your ad copy and landing pages for specific devices, which can improve your Quality Score and Ad Rank.
Cost per click (CPC) is the amount you pay each time someone clicks on your ad. Google uses a bidding system to determine how much you pay per click.
As you’ve no doubt noticed, the cost per click can vary greatly depending on the quality of your strategy. It is not tied to how much money you invest in your ads.
For instance, let’s explore Policrete’s example a little deeper.
Policrete made a significant reduction in their ad spend. They repurposed 72% and put it towards other marketing channels like SEO. However, despite spending less overall, their cost per lead also decreased by $34.52. So, for every dollar they were spending in 2022, they received more clicks and conversions than the previous year when they invested a higher amount into their ads campaign.
Many new businesses or people who DIY their ads experience the opposite pattern here where they increase their spend but also end up paying more to acquire a lead. So for every dollar spent, they end up getting fewer and fewer conversions. If you’re seeing this pattern, we suggest booking a free 90-minute strategy session with one of our advisors.
[feature_link]Get your free no-obligation strategy session with one of our Senior Digital Advisors. Book now.[/feature_link]
Otherwise, here are the areas where you can tighten up your Google Ads strategy so you stop throwing hard-earned cash down the drain.
As we mentioned earlier, Quality Score is an essential factor in determining your ad's cost per click. The Quality Score considers the relevance of your ad to the user's search query, the relevance of your landing page, and your ad's historical performance.
A high-quality score means you'l pay less per click, while a low-quality score means you'll pay more per click. It's essential to focus on improving your Quality Score to get the most out of your budget.
Ad Rank is another critical factor in determining your ad's cost per click. Ad Rank considers your bid amount and Quality Score to determine your ad's position in the search results. You need to be bidding enough to outrank your competition, otherwise, no matter how good your Quality Score is, you won’t see the level of conversions you may expect.
In short, the higher your Ad Rank, the higher your ad will be positioned in the search results, and the lower your cost per click will be.
A cost-effective (and profitable) Google Ads strategy goes beyond the bidding strategy. Sure, throwing more money into your campaign is likely to propel your ad to the top of the list. But it will likely be an unsustainable strategy in the long term.
Besides your bidding strategy, you can leverage Quality Score and Ad Rank to help you achieve better results without it costing you an arm and a leg in the process.
Google’s auction model determines both the cost of the click and the placement of your ad.
In short, your ad’s QS multiplied by your maximum bid will determine your Ad Rank. The campaign with the highest Ad Rank wins the top position.
Ad Rank Formula = (Your bid maximum) x Your Quality Score
The cost of a click = (Ad Rank of the ad underneath yours) / (Your QS) + $0.01
Key Takeaway: You can spend less while maintaining a higher ad position if you have a stellar Quality Core. [/tip_box]
While these formulas are all well and good in theory, your ultimate cost will come down to your bidding strategy. So let’s look at the complexities of bidding strategies next.
Budget, bid, and spend are some of the essential factors that affect the cost of your Google Ads campaign. These elements, and more, impact your Ad Rank, and therefore your final cost per click.
Budget: The maximum, total amount you’re willing to spend calculated on a per-day basis.
Bid: The maximum amount you’re willing to spend for a click on your ad.
Spend: The amount you pay Google when your ad wins an ad auction.
Cost: The final amount you paid for a click on your ad.
Your budget is the maximum amount you're willing to spend on your Google Ads campaign. Setting a budget is essential to ensure that you don't overspend on your campaign. You can start by setting a monthly Google Ads budget and dividing it by 30.4 to calculate your maximum daily budget.
We would advise a minimum budget of $1,000 per month, which is around $32 a day, if you’re just starting out.
We recommend that you set a daily budget to ensure that you don't exhaust your entire budget in a single day. This means that you can spread your budget over the entire month and receive fairly consistent leads coming through.
You can also set spending limits to ensure that you don't exceed your total budget. Spending limits are useful if you have a limited budget and want to ensure that you don't overspend. It can be easy to spend more than you planned if you don’t set things up correctly for your campaigns.
Your bid is the maximum amount you're willing to pay for each click on your ad. Your bid amount determines your ad's position in the search results, and the more you're willing to pay, the higher your ad will be positioned.
Your spend is the actual amount you've spent on your Google Ads campaign. Your spend is calculated based on your bid amount and the number of clicks your ads have received.
To get the most out of your Google Ads campaign, it's essential to balance your budget and bid to ensure that you're getting the most clicks for your spend.
Ad scheduling allows you to specify the times of day and days of the week when your ads will appear. This can be useful if you want to target customers during specific times of the day or days of the week.
Ad targeting allows you to target specific audiences based on demographics, interests, and behaviour. Ad targeting can help you ensure that your ads are reaching the right audience, which can help improve your Quality Score and Ad Rank.
Your ad copy and landing pages are essential factors in determining your Quality Score. It's essential to focus on creating compelling ad copy and relevant landing pages to improve your Quality Score and Ad Rank.
By focusing on these essential factors, you can improve your Google Ads campaign's performance while keeping your costs under control.
It's essential to understand the average cost per click (CPC) in Google Ads to set realistic expectations and plan your budget accordingly.
According to industry benchmarks, the overall average CPC for the Google Search Network is between $1 and $2 USD. However, the CPC can vary depending on the industry you're in, the competition level, and the type of keywords you're targeting.
For example, highly competitive commercial terms can have a CPC of $50 or more, while long-tail commercial terms can have a CPC of less than $1. On the Google Display Network, the average CPC is less than $1.
To get a better idea of the average cost per click in your industry and how you can launch a competitive ads strategy, consult with one of our Senior digital advisors.
Google Ads pricing varies according to many factors. However, your industry is one of the bigger influences with the prices being set according to how much your competitors think a lead is worth. WordStream has compiled some great benchmarks to give you an idea of the most competitive industries on Google Ads:
Businesses in Australia seem to spend around half as much on Google Ads as those in the US. In general, we’re seeing an average spend of around $4,000-$15,000 though businesses that are in an active growth phase are spending significantly more in order to outbid their competition.
The key thing we advise all of our clients on is to spend what they’re able to spend without over-extending their business’s finances. By leveraging the bidding system to your advantage, you can still compete with big spenders even on a smaller budget. It’s all about fine-tuning your strategy
Setting a realistic budget for your Google Ads campaign is essential to ensure that you're not overspending or underspending. To set a realistic budget, you should consider the following factors:
Reducing your CPC costs is also an effective way to make your Google Ads budget go further. Check out our blog post on reducing your CPC costs to learn more.
Many business owners wonder if it's cheaper to manage their Google Ads campaigns in-house or work with an agency partner. While managing your Google Ads campaign in-house may seem like a cost-effective solution, it can be challenging to achieve the same results as an agency partner.
Working with an agency partner can be more expensive upfront, but it can provide a higher return on ad spend (ROAS) due to their expertise and experience. An agency partner can help you create more effective campaigns, improve your Quality Score, and achieve better results.
It's essential to consider the cost of an agency partner and the potential ROAS when deciding whether to manage your Google Ads campaign in-house or work with an agency partner.
Yes, Google Ads is worth the money if you have a clear business goal and a well-structured campaign. Google Ads can help you reach a highly targeted audience, increase brand awareness, drive more leads or sales, and achieve a higher ROI.
It can also start delivering profitable leads far sooner than through other marketing channels,especially SEO.
To get the most out of your Google Ads campaign, it's essential to focus on improving your Quality Score, Ad Rank, and ad copy while keeping an eye on your budget and bidding strategy.
Book a 90-minute strategy session and get a clear idea of how to get the most from your Google Ads budget.
Despina is a Senior SEO Consultant with 8+ years of experience growing B2B, e-commerce, SaaS, and national brands.