How much does Google Ads cost? It’s a question we hear a lot at Kamreno, especially from clients who are new to paid search. Unfortunately, the answer is not so straightforward – it really depends!
For small to medium-sized business (SMB), Google Ads can be a powerful tool to increase your online visibility. However, understanding the costs can be overwhelming. In this blog post, we’ll break down the factors that influence Google Ads pricing, how your cost per click (CPC) is determined, how to set your daily budget, and what typical spending looks like across different industries.
Image taken from Semrush
Factors That Influence Google Ads Pricing
Several factors play a role in determining how much you will pay for Google Ads. Here are some of the main ones:
QUALITY SCORE
When someone searches on Google, Google searches for companies with ads that are bidding on keywords relevant to that query. Google then assigns all those ads with a Quality Score from 1-10 based on their relevance, expected click-through rate (CTR), and landing page experience.
Therefore, if you create ads that are relevant to keywords popular with your target audience and that lead them to a well-designed landing page, you can achieve better placements at a lower cost.
Competition
The more businesses bidding on the same keywords, the higher the costs. If you’re in a competitive industry, you may need to bid more to secure ad placements. For example, industries like legal services or insurance often face fierce competition for keywords, which can cause your costs to increase significantly.
AD RANK
After assigning each ad a Quality Score, Google will then calculate each contending ad’s Ad Rank, which determines if and where your ad will be placed in the paid results section. Your Ad Rank is determined by your Quality Score multiplied by your maximum bid (the most you’re willing to pay per click on your ad).
Higher Ad Ranks lead to better ad placements and potentially lower costs. It’s important to focus not only on how much you’re willing to pay but also on how relevant and engaging your ads are.
TARGETING OPTIONS
The audience you target can also affect your costs. For example, targeting specific demographics or locations may increase competition and CPC. If you’re targeting high-value customers or niche markets, be prepared for potentially higher costs due to limited availability of ad space.
How Google Determines Your Cost Per Click
Google uses an auction system to determine your Cost Per Click (CPC). When someone searches for a keyword you’ve bid on, Google runs an auction to decide which ads to display and in what order. Your CPC is influenced by:
Your Bid: The maximum amount you’re willing to pay for a click. Setting this amount requires an understanding of the value of a customer to your business.
Ad Rank: The quality and relevance of competing ads can affect your CPC. If competitors have high-quality ads, you may need to increase your bid or improve your ad quality to compete effectively.
Remember that if your ad gets shown, you only pay if someone clicks on it, and you’ll be charged by the CPC rate.
How to Determine Your Daily Budget
Setting a budget for your Google Ads campaigns is essential for managing costs effectively. The best way to work out your daily budget is to first decide on a monthly budget and divide by 30. But how do you set your monthly budget? Here’s how you can determine what works for you:
Assess Your Goals: Consider what you want to achieve with your ads (e.g., lead generation, sales). This will help you decide how much you’re willing to invest daily.
Evaluate Your Industry: Research average CPCs in your industry. This will give you an idea of how much you might need to spend to achieve results.
Start Small: If you’re new to Google Ads, start with a modest budget and gradually increase it as you learn which campaigns perform best. This approach allows you to test different strategies without overspending.
Monitor Performance: Regularly review the performance of your ads and adjust your budget accordingly. If certain campaigns yield better results, consider allocating more funds there.
Make Use of Google’s Budgeting Tools: Google Ads provides tools like performance forecasts that help predict how changes in budget might impact clicks and conversions. For example, the Google Ads budget report gives you a view of how much of your budget it spent on any given day.
Typical Spending on Google Ads by SMBs
The amount small to medium-sized businesses spend on Google Ads varies widely depending on industry and goals. Here’s a general overview:
Retail: Retail businesses often spend between £1,000 and £10,000 per month due to high competition for keywords related to products. Seasonal promotions can further increase this budget during peak shopping periods.
Legal Services: Law firms typically have higher CPCs due to competitive bidding on keywords like “personal injury lawyer.” Monthly spending can range from £2,000 to £20,000 as they seek high-value clients.
Healthcare: Healthcare providers might spend between £1,500 and £15,000 monthly depending on their services and local competition. Specialties like cosmetic surgery often see higher spending due to competitive keywords.
Home Services: Businesses in home improvement or maintenance (like plumbing or landscaping) usually allocate around £1,000 to £5,000 per month as they target local customers seeking immediate services.
Education: Educational institutions may spend between £500 and £5,000 monthly depending on their offerings and target audience.
These figures are just averages; actual spending will depend on various factors unique to each business.
Wrapping It Up
Understanding Google Ads costs can help you make informed decisions about your advertising strategy. By considering factors like Quality Score, competition, and industry benchmarks, you can set realistic budgets that align with your business goals.
While Google Ads offers immense potential for businesses of all sizes, the success of these campaigns often depends on the quality of management. If managing Google Ads feels overwhelming or if you need expert support, Kamreno offers comprehensive Google Ads management services tailored for small to medium-sized businesses. Our team can help optimise your campaigns for better performance while keeping costs under control. For more information about our services or book a call, don’t hesitate to get in touch.
