October 5, 2022

Every business that wants to navigate the online world needs more than a good marketing strategy to stand out from the fierce competition. It does not matter how many high-quality products are offered or how relevant and compelling the produced content is if a business fails to get them in front of their customers.

In an age when information is easily accessible, online users can hop from one website to another to get the information they need. They become more discerning about the content they consume. Suppose a business is only sticking with an organic strategy. In that case, they will have difficulty reaching a wider audience and less opportunity to convert what little website traffic they have into paying customers.

For many e-commerce business owners, paid advertising is part and parcel of their overall strategy. It is an effective way to grow and thrive amidst intense competition. And talks about paid advertising without touching discussing Google Ads.

Running Google ads is one of the most effective ways to widen the reach, boost brand awareness, drive traffic to the website, and generate much-needed leads. This much we know. The pressing question, however, is the cost of running one.

How Much Does Google Ads Cost?

So how much does Google Ads cost? This question is reasonable for marketers and online business owners to ask. It’s about the budget.

However, there is no exact answer to this question. The cost of Google Ads largely depends on various factors. This includes the objectives business owners will set for the ads. Google ads that aim to generate leads tend to cost more than running ads for traffic.

To understand the ins and outs of Google ads and their related costs, let us take a closer look at the following:

Factors That Determine the Cost of Google Ads

The cost of Google ads largely depends on various factors. Some of the biggest elements that can impact Google ad pricing include:

The Industry or Niche

The industry or niche a business is in is a huge factor in ad cost. If the industry is quite competitive, say real estate, accounting, or legal niches, a company can expect the Google ad cost to be expensive. There will be more competition for a spot on the first page of the search engine results.

The competitive verticals also translate to a higher cost per click. Depending on the business, getting just one client in those highly competitive niches could yield more than $1,000. This means paying $50 for the CPC is just a small price if a business can acquire a client from the ad.

Businesses that belong to the arts and entertainment industries tend to have lower CPC. While there is a lot of competition, the yield is not that great, so they need to reach more customers to hit the $1,000 mark.

The Customer Lifecycle

It is important to take the customer lifecycle into account. This factor influences the length of time and the hard work businesses need to put in to acquire clients. Customers might need a longer decision-making process, so companies need to make sure they stay top-of-mind throughout their client’s purchase journey. This means encouraging them to visit the website, download the content, or take on valuable offers before making up their minds.

The Current Trends

The current consumer trends do not always stay the same for a long time. They are ever-evolving, and businesses need to be flexible enough to adapt to them. The changing trends also affect the cost of Google ads. The state of the economy dictates how consumers will react and embrace the product or service offered.

During the height of the pandemic, the apparel industry enjoyed a lower average cost per click because conversion rates had gone up. People were wary about going outside to shop for clothes, so they explored their options online instead. Businesses have to be mindful of these changes to stay on top of their game.

Several Ways Google Determines Your Ad Cost

Google has a way of determining the cost of the ads. While the process follows an auction format, meaning businesses will need to bid for a particular keyword, they need not pay the maximum bid. Look at how Google picks the winners and how much they will be paying per click.

Quality Score

Google always makes sure to check if the advertisers are bidding for keywords relevant to a search query. Once they establish the relevance, the auction is triggered. This is when Google places all relevant ads into an auction and assigns each ad with a quality score, often somewhere between 1 to 10. The score is influenced by the ad and the landing page’s relevance to the keyword. It also considers the visitor’s experience once they reach the landing page and the expected click-through rate.

Ad Rank

Once the first step is done, Google will proceed with the ad ranking. This process is called the Ad Rank, in which Google determines if and where the ad will be placed in the paid results section. The rank is calculated by multiplying the quality score with the maximum bid.

Cost Per Click

The cost per click is determined by this calculation: the ad’s rank below the business’ ad is divided by the quality score. One percent is added to the result, and the business will get the cost they will need to pay for each click. If no one clicks on the ad after it goes live, the business need not pay. They only need to pay if someone does click on it.

Other Variables That Determine Your Google Ad Costs

  • Relevance of the landing pages.
  • Auction-time quality.
  • Alternative bidding methods.
  • Alternative ad formats.
  • User behavior in relation to the device they use, the location, and the context of their searches. Users that search Google with an intent to buy can cost higher than searches that only aim to learn more about the products.

Understanding How Budgeting Work with Google Ads

It is essential that businesses understand how budgeting works with Google ads. They won’t want to pour their monthly budget down the drain with nothing to show for it. To start, they need to look at the following terms:

  • Budget. This determines how much businesses are able and willing to spend on their ads.
  • Bid. This one sets how much businesses are willing to pay for a click on their ad.
  • Spend. This refers to the amount Google takes out of businesses’ budgets once their ads get added to an auction.
  • Cost. This term is the actual amount businesses pay for a click on their ad.

It is important to note that businesses can actually set a daily budget when they build their campaign in Google ads. Google won’t be spending the full amount of their daily budgets each day. This is only a rough idea that will guide Google into determining their daily spending to average out at the end of the month, which means it could exceed or fall short of the daily budget.

At the account level, businesses can set a spending limit. This means they won’t have to pay more in a day than their daily spending limit.

If they want to calculate their average daily budget, they need to look at their budget for the month for a particular campaign and divide it by 30.4. Their daily budget can largely depend on their overall Google ads budget and the average cost per click of the keywords they bid on.

Wrapping It Up 

Knowing the biggest factors that can impact a business’ ad cost is clearly not enough to run a successful Google campaign while keeping the costs down. It is important to ensure that they have a solid strategy in place. This includes making sure that the following are in order:

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