Today, 65% of small-to-midsized businesses (SMBs) invest in pay-per-click (PPC) advertising. Once you learn how to advertise on Google, many businesses get a big boost from their ad spend on Google Ads (previously known as Google AdWords).
While Google Ads offers an impressive return on investment (ROI) of $8 for every $1 spent, many businesses wonder about the cost of Google Ads and how much they should spend on Google Ads.
The average cost-per-click (CPC) on Google Ads is $1 to $2 for the Google Search Network and less than $1 for the Google Display Network.
Generally, small-to-midsized companies will spend $9000 to $10,000 per month on Google Ads, which doesn’t include additional costs, like software.
Now, are you ready to learn more about Google Ads pricing, from how it works to what other companies spend?
Your cheat sheet to Google Ads pricing
In a rush? Use our cheat sheet to Google Ads pricing for a quick summary of Google Ads’ costs:
How much does Google Ads cost?
While businesses spend an average of $9000 to $10,000 per month on paid advertising, there isn’t a one-size-fits-all answer to the common question of, “How much do Google Ads cost?” That’s because Google Ads is a truly customizable ad platform.
You have extreme control over how much you spend and when you spend it, and you can increase or reduce your ad spend in real-time as you see fit. That’s why the pricing flexibility of Google Ads is one of its biggest benefits.
How much do businesses spend on Google Ads?
Even though most companies spend $9000 to $10,000 per month on Google Ads, they use their ad spend in different ways.
Factors like their industry, products, services, and competitors all influence their Google advertising costs.
For perspective into your industry, check out this breakdown of CPC rates on Google Ads:
In most cases, industries with a higher CPC spend more on Google Ads.
The consumer services sector, for example, pays an average of almost $7 per click, which can move businesses in the industry to increase their monthly Google Ads spend. Companies can also have additional Google Ads costs, including:
Professional PPC management
When businesses invest in PPC, it’s not uncommon for them to partner with a PPC agency.
As a part of leading and managing your PPC campaigns, your PPC agency will charge a monthly management fee. This rate ranges from $350 to $5000 per month and does not include your monthly ad spend.
In some cases, your agency’s management fee will be a percentage of your ad spend. The average, for example, is 12 to 30 percent of a company’s ad spend.
So, if you have an ad spend of $5000 and your agency requires 12 percent of your monthly ad spend as payment, you would pay your agency $600 per month, in addition to spending $5000 on ads.
PPC management software
Businesses can also streamline internal PPC management with free and paid PPC software, like WordStream, Shape, or Acquisio. While optional, these tools can help your company optimize bids, evaluate ads, and more.
If you opt for a paid PPC management tool, prices range from $15 to $800 per month. Now that you have a background in the basics of Google Ads’ costs, are you ready to learn more about the platform and the ad auction that influences how much Google Ads costs your business?
Just keep reading to get started!
How much are you charged for a click on your Google Ads ad?
How much you are charged for a click on your Google Ads ad depends on several factors, including:
- Customer lifecycle
- Market trends
- Targeting settings
- Ad schedule
- Ad Rank
- Quality Score
While you can’t change your industry, you can influence other factors, like your ad schedule, targeting settings, and Quality Score.
For example, you could improve your landing page to boost your Quality Score or change when your ad runs via your ad schedule settings. For an actual price point, check out our summary of Google Ads pricing by industry.
What is Google Ads?
Google Ads, previously called Google AdWords, is Google’s PPC advertising platform.
You can use it to create advertisements, bid on specific keywords, and determine how much you’re willing to pay for every click on your advertisement because Google Ads operates on an auction system, which happens in real-time.
When users search for a keyword you’ve selected, if your bid is higher than what other advertisers bid on that keyword, your advertisement will appear at the top of the search results with a small tag next to it indicating that it’s a paid result.
The best part of Google PPC costs is that you only pay when a user actually clicks on your ad.
It doesn’t matter how many times it’s displayed or how many people see it — you only pay when someone clicks and visits your website.
You can also set daily and monthly budgets on a campaign-by-campaign basis. So, after you find a winning keyword to bid on and a winning ad to run, you can let your campaign run knowing that you won’t go over a specific budget.
How does Google Ads work?
When researching how much Google Ads costs, it’s essential to understand how the platform works. That’s because the design of Google’s auction system plays a role in your Google Ads cost and understanding this system can help you build a realistic budget for your campaigns.
Google Ads utilizes an auction model to determine both ad placement and cost.
An ad auction begins when a user searches for something on Google. If the search query matches up with keywords that advertisers are actively bidding on, eligible ads go to auction.
Within the auction, ad placement and cost per click are determined by an advertisement’s Ad Rank. Your ad’s ad rank is based on two things – your maximum bid for that specific keyword, and your ad’s quality score.
We won’t get into Quality Score (QS) in-depth on this page, but check out our recommended reading below to learn more about this metric and how to improve it.
As a brief overview, though, your ad’s QS is determined by a combination of its relevance to the keyword that triggered it, its click-through rate (how many users click on it vs. how many times it’s been shown), and the quality of whatever page users land on after clicking your ad. The Ad Rank formula, then, is a simple one:
(Your maximum CPC bid) x (Your ad’s QS)
So, if your maximum bid for a specific keyword is $4, and your ad has a QS of 8, your Ad Rank is 32. Within a single auction, whoever ends up with the highest Ad Rank wins the top advertising spot. Google also uses Ad Rank to calculate how much you end up paying per click. The formula they use to calculate your actual CPC is:
(Ad Rank of the ad below yours) / (Your QS) + $0.01
Here’s a quick example to illustrate what I mean:
The most important takeaway here is that you can end up spending less while maintaining a higher ad position if your ad has a stellar QS.
How can I set a realistic budget and bid for Google Ads?
Want the answer to your PPC budget question in a video format? Hit the play button on the video below.
Now that we’ve dug into exactly how Google Ads works, you can see why, “it depends” is a practical answer to the question, “How much does Google Ads cost?”
When you advertise on Google Ads, you have (mostly) full control over your ad spend.
There are certain variables you have direct control over, like your maximum CPC bid and the quality of your ads, but there are also factors you can’t really control, like your competitors’ max CPC bids and the quality of their ads.
That’s all within the Ad Auction, though. Before you even get to that point, you have to consider how competitive your niche is and how competitive individual keywords within your niche are.
This is where you can get creative to keep your Google PPC costs down. Let’s say you work in insurance, and you’re bidding on the keyword “car insurance.” This is a broad, highly competitive term that gets searched millions of times per month, so your CPC bid is probably going to be high.
If you want to keep your Google advertising costs as low as possible, you could do some keyword research and come up with less competitive, less expensive keywords to bid on.
You could bid on specific, long-tail keywords like “van insurance for seniors,” or something along those lines.
These keywords will have lower search volume and may net you fewer clicks overall, but they’ll often be magnitudes cheaper than broad, competitive keywords like “car insurance.”
They’ll also connect you with users looking for the services that you specifically offer.
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Why advertise on Google Ads?
While Google Ads pricing varies and depends heavily on your business, industry, strategy, and competitors, the platform offers an immense amount of advantages.
If you’re thinking about getting started with Google Ads, but on are on the fence, this breakdown of Google Ads benefits can help. Three reasons companies invest in Google Ads include:
1. Budget control
Google Ads blows most other advertising channels clear out of the water when it comes to budget control. There is absolutely no minimum investment required to create a Google Ads account or run a Google Ads campaign. You could launch a test campaign on a $5/day budget if you really wanted.
Your results will depend, again, on how competitive the niche and keywords you select are, but the point is that you can then increase your budget as necessary.
This leads right into the next advantage of Google Ads…
Everything you do with Google Ads happens in real-time. That means you can scale up as soon as you’ve identified a successful campaign, or you can scale down as soon as you see a campaign underperforming. You’re not locked into any contract, required monthly spend, or anything like that.
The potential to scale really is unlimited with Google Ads.
If you have a certain campaign that’s bringing you great results with a spend of $500/month, you can instantly increase that $500 to $5,000 or beyond!
You have access to every last bit of data related to your campaign performance with Google Ads.
You can see exactly how many times your ad got served, how many people clicked on it, how many people converted after clicking on it, what time of day the ad is most successful, information about what sorts of users click on your ad, and more.
The amount of data available through your Google Ads dashboard is truly staggering.
This stands in stark contrast to the ambiguity of other advertising channels. Most forms of traditional advertising — TV, radio, newspaper — come with extremely limited analytics. You don’t actually know how successful your campaigns are, because you don’t know how many people see your ads or take action because of them.
Need help creating your Google Ads budget?
While most companies spend $9000 to $10,000 per month on Google Ads, there isn’t a definitive answer to the question, “How much does Google Ads cost?” and that’s for good reason.
How much you spend on Google Ads is entirely up to you. The right Google Ads spend for your business depends on numerous factors, including ad performance, your industry, your goals, the tools you decide to use, and more.
Whatever approach you decide to take, Google Ads is a fantastic advertising method for almost any business out there.
Worst case scenario, you might lose some of your budget on an unsuccessful test campaign.
But when you realize what you stand to gain from a successful Google Ads campaign, you’ll be asking why you didn’t give it a shot sooner! If you’re looking for help building your Google Ads budget, as well as developing your campaign, our PPC management services for Google Ads can help.