Google estimates businesses generate about $8 in profits for every $1 spent on an ad. Though this estimate suggests that Google Ads have an 8:1 ROI, many people want to know the cost of using the advertising platform.
The Google Ads platform undeniably plays a major role in digital marketing. It allows your ads to appear in search engine results pages once you place bids on certain keywords. The ads appear on other Google products, such as the AdSense program and Display Network.
Understanding the costs of Google Ads can help you decide whether it’s a good investment. This guide covers everything you should know.
What is Google Ads?
Google Ads (formerly known as Google AdWords) is Google’s main pay-per-click (PPC) advertising platform. It can help you create ads and bid on profitable keywords through an auction system.
When internet users search for keywords you bid on, Google Ads will display your ad on top of the search results. You can only enjoy this benefit if your bid on a keyword is higher than what other advertisers bid on that keyword. The ad will have a small tag to suggest that it is a paid search result.
Through the Google PPC platform, advertisers only pay when a user clicks on the ad. It won’t matter the number of times Google displays the ad or the number of people who view it.
Google Ads also allows you to set daily or monthly advertising budgets for your campaigns. This way, you can run a campaign within the limits of your advertising plan and budget.
Factors That Influence the Cost of Google Ads
Factors like your industry, competitors, product, and services can affect your Google Ads costs. The costs also depend on the platform that will display the ads.
The legal, finance, and insurance industries have the highest CPC on search networks. Industries with the lowest CPCs are advocacy, e-commerce, and travel and hospitality.
A higher CPC means that the costs of advertising are higher. It also suggests that many internet users search for terms related to that industry.
Market trends, customer lifecycle, bids, and budgets affect Google advertising costs. The same applies to the keywords, targeting settings, ad rank, and ad schedule.
If the Google Ads platform disapproves of your ads, it won’t affect the costs. The disapproval will remain the same whether you change your industry. You can only influence factors such as quality score, targeting settings and schedule.
Costs from Google Ads to Expect
While advertising on Google, expect to spend on the ads themselves if users click on them. Here’s a list of the expenses to anticipate:
- CPC (between $1 and $2 per click on the Google Search Network and $1 or less per click on the Google Display Network)
- Professional Google Ads management (about $350 to $5,000 or 12-30% of your ad spend monthly)
- PPC management tools (between $15 and $800 per month)
You may invest in professional PPC management if you run a big business. The role of a PPC agency here is to develop, launch and manage your paid ad campaigns. They will run them on several advertising platforms, Google Ads included, to grow your digital footprint.
You may also invest in PPC management software if you have an in-house marketing team with great advertising ideas. PPC management tools come at a cost, which will form part of your total advertising costs.
How the Pricing on Google Ads Works
Google Ads relies on an auction system to help advertisers bid on ads. The auction system draws keywords from Google searches. If a user searches for keywords that advertisers bid on, the advertisers’ ads go to the auction.
The auction uses Ad Rank to determine the ad placement and CPC (cost per click). It also ranks ads depending on their quality score and maximum bid on a particular keyword.
Factors such as keyword relevance and click-through rate determine an ad’s quality score. The quality of your landing page also plays a part in this process.
Whoever has the highest Ad Rank in the auction wins the top ad spot. If you win, Google will calculate your costs per click using Ad Rank. Either way, you can spend less for a top advertising spot if your ad has a great quality score.
Setting a Reasonable Budget and Bid for Google Ads
The Google advertising platform gives advertisers full control over their ad spend. So, you can control factors such as the quality and maximum cost per click of your ads. The only factors out of your control are the competitors’ ad quality and maximum cost-per-click bids.
To work within a realistic budget, consider the competitiveness of your niche. As part of your advertising strategy, look at how competitive keywords in your industry are.
Avoid highly competitive keywords in your niche. For instance, if you bid on a keyword like ‘auto insurance,’ you will likely spend more. The keyword itself is a broad term with many searches online.
Through keyword research, you can find less competitive keywords. This way, it will cost you less to place a bid.
Long-tail keywords, such as ‘truck insurance for farmers,’ are less competitive. Their search volume and click-through rates are quite low. They can help you connect with consumers looking for services that fit that description.
Is Google Ads Worth Spending On?
Though their pricing varies, ads run on Google Ads offer massive benefits. The top two benefits are scalability and analytics.
You can modify your ads on the platform in real time. And if you choose to scale them up or down, you can do so without difficulty. There’s no contract locking you to Google Ads or requiring you to pay anything.
On matters of analytics, you can access all your campaign data on Google Ads. The platform also gives insights into impressions and conversions.
Need Digital Marketing Services?
Your ad spend on Google Ads depends on certain factors such as your advertising plan, industry, and ad performance. Whatever approach you use, the platform can cater to your advertising needs.
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