Introduction to Google Ads Pricing
Google Ads, is Google's advertising platform that allows businesses to bid on specific keywords and have their ads displayed in Google's search results or on websites within Google's Display Network (GDN). With a desktop search market share of 83.84% and 33% of mobile ad spending going to Google, it's the most popular pay-per-click (PPC) network for digital advertisers, offering a high return on investment. With a low barrier to entry Google Ads can be a great starting point for new advertisers who want to promote their product or service and with Search Ads advertisers are able to target users at a time when they're looking for a solution to their problem. Advertisers can also use platforms like Facebook, Snapchat, TikTok and LinkedIn to reach their target audiences.
Factors Influencing Google Ad Pricing
Google Ad pricing varies depending on several factors, such as industry, customer lifecycle, market trends, and account management. Let's dive into each factor to understand how they impact the cost of Google Ads.
The industry you operate in is the most significant influence on Google Ad pricing. Competitive industries, like legal, accounting, SaaS and real estate, have higher costs per click (CPC) due to the nature of their business and the potential revenue generated from a single client. Businesses in less competitive industries, like arts and entertainment, typically have lower CPCs. It's important to note that higher CPCs tend to also have a high customer value and likewise lower CPCs tend to have a lower customer value.
The customer lifecycle also impacts Google Ad pricing. For high-ticket offerings, customers may take longer to move through the decision-making process, requiring multiple touch points before making a purchase. This means that businesses need to stay top-of-mind throughout the customer journey, which can involve higher advertising costs as they need to show ads consistently to the user. Having a well defined audience structure based on your website behaviour and making use of remarketing campaigns can help businesses stay in the mind of customers or potential customers.
Market trends and consumer preferences change over time, affecting the cost of Google Ads. It's essential to stay updated with industry and niche trends to adapt your advertising strategy accordingly. For example, an event like Black Friday can result in higher CPCs compared to the norm. Retail media CPCs increased by a huge 43% in 2022 however this sale period also experiences a big increase in conversion rate which corresponds to a considerable lift in revenue during. Make sure to consider seasonality and how this impacts your conversion rate when developing a yearly advertising budget.
Ad Account Management
The way you manage your Google Ads account also influences its cost. A well-managed account can help you achieve a higher return on investment (ROI) while keeping costs low. To do this, you need to maintain proper account structure, report on performance, optimise ads based on data, and perform regular account audits. Investing in professional PPC management can really help with this aspect and if you are looking for an agency to do just last Lever Digital is here to help.
Google Ads Auction System
To understand Google Ad pricing, it's essential to know how the Google Ads auction system works. This system determines your ad placement and cost-per-click (CPC) in real time. Optimising these factors can help bring down costs and increase conversion rate as you show more relevant content to users.
When someone searches on Google, and relevant keywords are bid on by advertisers, an auction is triggered. Google assigns each ad a Quality Score, ranging from 1-10, based on the ad's relevance to the searched keyword, expected click-through rate, and landing page experience.
Google calculates each ad's Ad Rank, which determines ad placement in search results. Ad Rank is determined by multiplying the Quality Score by the maximum bid (the highest amount an advertiser is willing to pay per click). Ads with the highest Ad Rank get displayed in the search results. Quality Score in itself is made up of three different factors - Expected CTR, Ad Relevance and Landing Page Experience.
If your ad is shown in the search results, you only pay when someone clicks on it. However, you don't necessarily pay your maximum bid. Instead, Google calculates your cost-per-click using the following formula: (Ad Rank of the ad below yours) / (Your Quality Score) + $0.01.
Budgeting and Bidding in Google Ads
Setting the right budget and bidding strategy is crucial for managing Google Ad pricing effectively.
Setting Daily and Monthly Budgets
Google Ads allows you to set average daily and monthly budgets for each ad campaign. This helps you control your ad spend and prevents overspending. Keep in mind that your daily budget may be exceeded by up to 100% on some days but this will average out over 30.4 days (the average number of days in a month). The reason for this is that performance is non-linear and with fluctuations Google will attempt to bring the best results within the given constraints.
Understanding Bidding Strategies
Your bidding strategy determines how much you're willing to pay per click on your ad. Google Ads offers various bidding strategies, including manual and automated bidding. Manual bidding allows you to set different bid amounts for each keyword, while automated bidding sets maximum bid limits based on your budget and goals. For example, with manual bidding you can provide a maximum CPC that you are willing to pay whereas with a bid strategy you provide a CPA target or a ROAS target and let the bid strategy optimise the bids automatically.
Average CPC for Google Ads
The overall average CPC for Google Ads is $1 to $2 on the Google Search Network and around $1 on the Google Display Network. However, these costs vary massively by industry, campaign targeting, and ad network.
Small Business Investment in Google Ads
Small businesses typically spend between $1,000 and $10,000 per month on Google Ads. This translates to an annual ad spend of $12,000 to $120,000. While this may seem like a significant investment, it's essential to remember that Google Ads can offer a high ROI and Google themselves suggest a 200% average ROI for every $1 spent on the platform.
Google Ads Cost by Industry
The cost of Google Ads can vary significantly by industry. For example, the legal, accounting, and real estate industries typically see higher CPCs due to the potential revenue generated from a single client. Conversely, industries like arts and entertainment may have lower CPCs due to the need to reach a larger audience to generate similar revenue.
To get a better understanding of Google Ads costs by industry, you can refer to WordStream's online advertising benchmarks.
Optimising Your Google Ads Campaign
Optimising your Google Ads campaign can help you maximise your investment and achieve better ROI. Here are some tips to improve your campaign performance:
- Maintain a proper account structure, including appropriate campaign types, ad group levels, keyword selection, ad copy, and ad extensions.
- Implement robust tracking infrastructure.
- Regularly monitor and analyse your campaign performance to make data-driven optimisations.
- Adjust your bids and bid strategy targets based on performance, industry trends, and your Quality Score.
- Perform regular account audits to identify areas for improvement and eliminate wasted ad spend.
Google Ads for Different Ad Types
Google Ads offers various ad types, including search ads, display ads, and shopping ads. Each ad type has its own pricing structure and benefits.
Search Ads Pricing
Search ads are text-based ads that appear in Google's search results when users search for specific keywords. The average CPC for search ads is between $1 and $2, but this can vary depending on the industry and competition. Search ads are considered a bottom of the funnel advertising type and are suitable for businesses who looking to drive website traffic and generate leads or sales from users actively searching for their products or services.
Display Ads Pricing
Display ads are visual ads that appear on websites within Google's Display Network. These ads typically have a lower average CPC than search ads, generally around $1. This is because the user who clicks on a Display ad is deemed to have a lower intent. Display ads are ideal for raising brand awareness and targeting users based on their interests, demographics, and browsing behaviour.
Shopping Ads Pricing
Shopping ads are product-based ads that appear in Google's search results and on Google Shopping. These ads display product images, prices, and merchant information. Shopping ads are an excellent option for e-commerce businesses looking to drive sales directly from search results. The cost of shopping ads can vary depending on the competition and the products you're promoting.
Making the Most of Your Google Ads Investment
Understanding Google Ad pricing and optimising your campaigns can help you maximise your investment and achieve better returns. By considering factors like industry, customer lifecycle, market trends, and ad account management, you can make informed decisions about your advertising budget and strategy. Additionally, focusing on the right ad types for your business and investing in optimisation efforts can lead to a successful Google Ads campaign. If you need help or are looking for a team of PPC experts to manage your online advertising complete our enquiry form and we'll be in touch.