How much is Google Ads/Search Engine Marketing (SEM)?
Updated: Apr 4, 2022
How much does Google Ads cost? It’s a reasonable question, and one we hear all the time, especially from newcomers to paid search. After all, you’ll want to know whether you can afford it. The good news is, you can. The bad news is, there’s no easy, one-size-fits-all answer. The clearest (and most infuriating) one we can provide is: it depends.
Factors that impact Google Ads pricing
As mentioned, there is no simple or one-size-fits-all answer to the question of how much Google Ads will cost your business. Google Ads pricing varies depending on your industry, customer lifecycle, current trends, and how well you manage your account.
The biggest influence on Google Ads pricing is the industry. For example, the business services vertical (legal, accounting, real estate, etc.) is one of the more competitive verticals in Google Ads, which generally translates to higher costs per click (CPC). This is due to the nature of the professional services industry: one new client could yield upwards of $1,000 – $10,000 depending on your business, so a CPC of $50 is a small price to pay for that client.
On the other hand, businesses in the arts and entertainment vertical have lower CPCs, but they need to reach a lot more customers to hit that $1,000 – $10,000 number.
You also have to take into account the lifecycle of your customer. For bigger ticket offerings, it takes longer for potential clients to move through the decision-making process, and your business needs to stay top-of-mind throughout that journey. This may involve multiple visits to your website, a content download or two, participation in a webinar, and more—before taking that final step.
How well you manage your account
A recent study by Google showed that the average ROI on Google Ads is 800%—that is, $8 for every $1 spent. Of course, this all depends on how well you manage your account. You can’t just activate your ads and kickback. If you want to keep your Google Ads costs low and your returns high, you need to:
Keep a proper Google Ads account structure.
Report on your performance and make data-driven optimizations.
Maintain your keyword lists.
Perform regular account audits and more.
Are you making any costly mistakes in your Google Ads account? Use our Free Google Ads Performance Grader to find out.
How does Google Ads determine your cost per click?
The great part about Google Ads is that while it works like an auction, the winners aren’t chosen based on bid alone, and you don’t necessarily pay your maximum bid. How is this possible? Let’s take a quick run-through on how Google Ads determines the winners and what they pay per click.
Step #1: Quality Score
Step #2: Ad Rank
Step #3: Cost per click
Additional variables in your Google Ads costs
There are several other variables that impact your Ad Rank—and ultimately, your ad spend—but the maximum bid and Quality Score are the important ones to know. Here are some (but certainly not all) of the additional factors that influence your costs.
Landing page relevance and experience
The device, location, and context of users’ searches
Alternative bidding methods
Alternative ad formats
How does budgeting work with Google Ads costs?
Let’s move on to the next component of Google Ads cost: budgeting. All too often, advertisers see their Google Ads budget for the month get burned up in a matter of days, leading them to believe Google Ads are prohibitively expensive. This isn’t necessarily the case; more often than not it’s the result of a misunderstanding of how Google Ads budgeting works. So let’s set the record straight. Here are the terms to know:
Budget: How much you’re able to spend on Google Ads
Bid: The most you’re willing to pay for a click on your ad.
Spend: The amount Google takes out of your budget when an ad participates in an auction.
Cost: The actual amount you pay for a click on your ad.
Daily average budgets
When you set up a campaign in Google Ads, you will be asked to provide a daily budget. There is a shared budget feature, but if you’re just starting out, it’s best to give each campaign its own separate budget. But the daily budget you set does not mean Google will spend that exact amount each day. You’re giving Google a rough idea of what you’d like your daily spend to average out to at the end of the month—meaning it could exceed or fall short of that amount on any given day. This leads us to spending limits.
Originally, Google could spend up to 20% more than your daily average budget in this manner—until October 2017 when it announced it could spend up to 100% more of, or double, your budget—if it means more clicks or conversions. This means that if you set a daily average budget of $50, your daily spending limit is $100. You will never pay more in a day than your daily spending limit, and you will never pay more than a month than your monthly spending limit (your average daily budget x 30.4; although if you’re not paying for Google Ads with the invoice method, you can set a monthly spend limit at the account level).
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