When advertising with online technologies today, many people are unsure of where to start.

There are so many different platforms, such as Facebook, Bing, and Google overall.

Google alone has a number of specific platforms for advertising such as YouTube In-Stream Viedo Ads & Google Display Network, Google+ for Brands, and of course the ubiquitous Google Ads.

Each of Google’s products has different advertising costs, today’s Blog will focus on Google Ads’ advertising costs.

“How much does Google Ads cost?”

It’s one of the first questions from prospective newcomers to paid search.

After all, those new to pay per click are probably most interested in how much they’ll be expected to pay to advertise on Google, and whether they can even afford it!

Unfortunately, there’s no easy, one-size-fits-all answer when it comes to Google search engine costs.

The most common (and infuriating) answer is, “It depends”, as it is going to vary based on your industry, targeted audience and several other variables.

We’ve seen the cost per clicks as low as $0.25 when advertising on behalf of a real estate agent in a small town, to upwards of $20 per click when running ads in competitive small business software.

Before we can answer some of the basic questions, such as what is the cost per click?

We need to look at how Google Ads actually works.

How does Google Ads work?

One of the biggest misconceptions about Google Ads is that whoever has the most money to spend has the most influence.

While a bigger ad budget never hurts, it does not have a major effect on what you will pay for Google Ads which provides a more level playing field than many new advertisers realize, providing real advertising value for even the smallest of daily budgets.

Google Ads functions in essentially the same way as an auction. Let’s take a look at how this process works.

The Ad Auction

The ad auction begins when a user enters a search query, after which Google determines whether the query contains keywords that advertisers are currently bidding on.

If advertisers have bid on some of the keywords in the user’s search query, the ad auction begins.

The purpose of the auction is to determine Ad Rank, or where each ad will be positioned.

The auction determines the inclusion and placement of ads according to the Ad Rank formula based on two main factors – maximum bid and Quality Score:

So, back to how Google Ads works. Once your Quality Score and Ad Rank have been calculated, Google Ads Cost Calculator uses this data to determine how much you’ll pay each time someone clicks on one of your ads.

This formula looks like this:

Notice how Advertiser 1 can pay less for a higher position due to their better Quality Score?

This is essentially how Google Ads works in a nutshell.

As documented above, Google advertising costs in Australia are affected by a number of variables.

By using the Google Ads cost estimator, the information in the table below shows an example of keywords and their bid costs for different industries in different geographical locations.

It should be noted that the Google Ads cost per click calculator, provides an estimate of the costs per click that tends to the high side of costs.

Wordstream’s estimation, for example, shows costs between 25-30% of the Google costs. The reality is generally in between.

Competition is also another key variable

The more businesses that are advertising in a particular industry, the higher the price point will be. Since you bid on keywords, more bidders will drive up prices, just like in a standard auction.

Understandably these costs can be quite a shock to first-timers who may be wanting up to 120-150 clicks per month.

Advertisers might assume their ad budget will last them for a month, based on the above estimates they may discover that they’ve blown through their small budget in a matter of days.

This can lead to yet more misconceptions about paid search, namely that it’s prohibitively expensive.

However, this isn’t necessarily the case and is more often than not the result of a misunderstanding of how budgeting works.

How Do I Manage My Google Advertising Costs?

There are a number of strategies that can be employed to lower your Cost Per Click (CPC).

Dayparting

Also known as ad scheduling, dayparting is the practice of specifying when you want your ads to appear to prospective customers.

Although your ads will still have to go through the ad auction process, you can tell Google when you want your ads to be displayed.

This is especially useful for local businesses that want to drive customers to a physical location through their ads.

If you run a bakery that closes at 7 p.m., for example, you may not want your ads to be shown outside your normal business hours.

Alternatively, you can specify that your ads run continually throughout the day but allocate a greater portion of your daily budget for hours during which you want increased visibility.

Geotargeting

Just as you can allocate more of your budget to certain times of day, you can also spend more of your budget on certain geographical areas.

This technique is known as geotargeting.

Geotargeting allows you to prioritize the display of your Ads to searches coming from specific areas.

These areas can be as large as a state or province, or as small as a three-block radius from your store.

The example above shows a geotargeted area with a 20-mile radius around London.

Geotargeting can be an excellent way to capitalize on growing mobile traffic trends and on-the-go shopping habits of today’s consumers, and it might factor into how you allocate your daily ad budget.

For example, you may want your ads to appear alongside relevant searches in a particular state, but you could also allocate more budget to searches conducted in a specific city or even neighbourhood.

To learn more about geotargeting and local PPC, check out this guide.

Device Targeting

As with geographical targeting, device targeting is a valuable strategy.

Let’s say that you want to appear on results across both desktop and mobile searches, but that mobile traffic is more valuable to you.

You could specify that a portion of your budget is used for desktop, but a greater portion is allocated to mobile devices.

Test new ads continuously

The only way to test which ads will have a higher click-through rate or lower cost per click is by constantly testing your ad copy.

The ad may look great to you, but you may be unknowingly sending a confusing message to users.

Work to increase Quality Score

Google also takes into account how relevant and useful an ad will be to the user when deciding which ads to display on the results page.

For example, if your practice specializes in cosmetic dentistry, you may be able to bid less and still have your ad show before a dentist who bid more but doesn’t mention cosmetic dentistry in their ad or on their website.

Prioritize Long-Tail Keywords

People sometimes like to point at the grand, show-stopping keyword categories above as a definitive example of how expensive PPC can be.

The reality, however, is that these keyword categories only make up a small portion of total search volumes.

Long-tail keywords actually account for the majority of Web searches.

The short-termed keyword “Lawyer” may cost advertisers $100+ per click, but long termed keywords like “Melbourne Workers Compensation Lawyer” can help advertisers attract more specific traffic at a lower cost per click.

This is the kind of opportunity that long-tail keyword targeting presents to advertisers.

In addition to making up the vast majority of searches, long-tail keywords are also often significantly cheaper than shorter keyword-rich queries and can have as much – if not more – commercial intent.

How Much Do Small Businesses Spend on PPC?

Usually, once someone has asked about the average cost-per-click of a PPC ad, their next question will be how much do “typical” businesses spend on PPC as part of their larger online marketing costs.

Unfortunately, this is another question without an easy answer.

Some only spend around $3-5,000 per annum (and I say “only” purely for the purposes of context – that’s still a lot of money to many small businesses), whereas others at the higher end of the market may spend upward of $30,000 per month.

On averarage, we could say that a middle company budget for ads in USA or Australia could easily be around $10,000 per month.

What Other Costs Are Involved in PPC?

Your ad budget will always be the largest, most direct cost associated with your PPC campaigns.

However, while your ad budget is important, it’s not necessarily the be-all and end-all of your paid search efforts.

There are other potential costs you may have to consider, depending on your business, marketing goals, and individual situation.

Agency Costs

Some small businesses opt to have a Digital or Online Marketing company who specialises in Google Ads handle their PPC work for them.

This approach offers several benefits, such as minimal personal investment of time and effort in actually managing your PPC account.

These companies can also provide other services such as Search Engine Optimisation, Web Site development and hosting.

They boast many years of experience in these areas, making them trustworthy partners who can offer expert advice and guidance.

PPC Management Software

Google Ads is a great advertising platform.

It offers advertisers a high degree of control over the precise variables in their accounts and can be extremely powerful in the right hands.

The biggest complaint we hear from our clients is that, for all its power, Google Ads can be intimidating – especially to new advertisers.

That’s why many businesses opt to use PPC management software.

Some business owners opt to manage their PPC accounts manually, however, if you’re pushed for time or aren’t sure what you’re doing (or both), investing in PPC management software is a great way to save time, reduce costly mistakes, and get on with actually running your business.

The Price Is Right

As I’ve stated throughout, there are numerous factors that can have a significant impact on the cost of running a PPC campaign, but remember: almost any type of business can make Google Ads work for them!

If you’re not sure about anything I’ve covered in this guide, or you have specific questions, leave a comment and we’ll answer them as best we can.