Investing in Google Ads can contribute significantly to the success of your business.
In fact, Google states that their average advertiser makes two dollars for every dollar spent. This means that the majority of people using the platform are no less than doubling their investment.
While this might sound great in theory, you don’t want to be surprised with an unexpectedly scary price tag after you start your campaign. Understanding how much Google Ads cost and using Ampd’s ad automation toolkit can help you maximize your Google Ads return on investment and power up your success.
Today, we are going to take a look at how Google Ads cost is calculated and what factors can affect the final number.
How Much Do Google Ads Cost for a Typical Business?
Usually, if someone is wondering how much Google Ads cost, they are also curious to find out how much “typical” businesses spend on Google Ads.
As expected, the amount that businesses spend on PPC varies significantly. For example, small businesses and/or startups tend to spend in the hundreds per month, while larger PPC management agencies can invest up tens of thousands of dollars per month. Individual companies within the most competitive industries, such as insurance and online education, can end up spending millions of dollars a year.
That being said, you don’t have to sell your car to afford Google Ads. Instead, you can use a one-of-a-kind ad automation system from Ampd to amplify your ad dollars and truly maximize your Google Ads returns.
How Does Google Calculate Ad Costs?
Google doesn’t use a set price for each ad. Instead, it applies an auction model where advertisers bid on different keywords. This means that millions of auctions are occurring on Google every single minute.
It also means that pricing can vary, depending on how much competition there is and how much your competitors are ready to pay. It isn’t uncommon to see price variations, as demand rises or falls; however, you don’t necessarily need to have a significant budget to compete.
Google Ads’ formula for displaying ads, or ad rank, depends on two factors—your maximum bid and your ad’s quality score.
Below, we are going to discuss maximum bid, quality score, and ad rank in more detail, and how they contribute to your Google Ads cost.
Your maximum bid is the maximum amount you are willing to pay for a single click on your ad. This means that you will never pay more per click than your maximum bid, but you might end up paying less.
You set your maximum bid when you create an ad campaign, and you are free to update it at any time.
Ad Quality Score
While the maximum bid may favor large, already-successful brands, the quality score is what allows everyone to compete.
Your ad’s quality score is calculated by Google based on several factors, such as the ad’s click-through-rate (CTR), its relevance to the keyword, and how good the landing page is.
The position of your ad in Google search result is determined by your ad rank.
Google’s ad rank is calculated as:
Ad Rank = [Maximum Bid] x [Ad Quality Score]
For example, if your quality score is 6, and your maximum bid is $5, your ad rank would be 5 x 6 = 30. The advertisement that has the highest ad rank will be in the first position. The ad with the second-highest rank will be in the second one. And so on.
Cost Per Click (CPC)
The cost per click, or how much you end up paying for each click on your ad, also depends on the ad rank:
Cost Per Click = [Ad Rank of Ad Below] / [Your Quality Score] + $0.01
As you can see, having a good quality score can help you to reduce your Google Ads cost significantly.
Managing Your Google Ads Spend
Managing your budget can help you to control your ad spend and get the most out of your investment. Within Google Ads, you can find several types of budgets and spending limits.
Average Daily Budget
Your average daily budget is the average amount that you are ready to pay for your ads on a daily basis. You can set and update this budget at any time, and Google will automatically optimize your campaign spend for maximum results.
For example, on days when you are more likely to get clicks or when search traffic is higher than usual, Google will predict higher RoI for your ads, and will likely exceed your daily budget. On other days, however, you may not reach the set budget.
Over the course of the month, your average spend will still correspond to the predetermined average daily budget.
Calculate Average Daily Budget
If you have a monthly amount set aside for advertising, you can easily convert it into average daily budget as follows:
Average Daily Budget = Monthly Budget / Average # of Days in a Month
The average number of days in a month is easily calculated as 365 / 12 = 30.4.
So, if you want to spend $304 per month on Google Ads, your average daily budget would equal to $304 / 30.4 = $10.
How is the Daily Budget Spent?
Let’s say that, based on your maximum bid and ad quality score, your ad’s CPC came out to be $0.20. If you don’t want to spend more than $10 per day, you can expect to receive $10 / $0.20 = 50 clicks per day.
You could still spend more or less than $10 per day and receive more or less clicks correspondingly, but, on average, you would stay within your average daily budget.Daily Spending Limit
Daily spending limit is the maximum amount that you can be billed for your campaign on any given day. For most campaigns, it is determined as:
Daily Spending Limit = Average Daily Budget x 2Monthly Spending Limit
Maximum spending limit is the maximum amount that you can be billed for your ad campaign over the course of one month.
It can be calculated as:
Monthly Spending Limit = Average Daily Budget x 30.4
Remember that 30.4 is the average number of days in a month.
Get More for Less with Ampd
Unfortunately, there is no clear-cut answer to the question of “how much do Google Ads cost.” The total cost will depend on your industry and target keywords, monthly budget and bidding strategy, ad type and schedule…the list goes on.
And while Google Ads may seem pricey and unpredictable, their undeniable advantage is that they can quickly but surely expand your brand visibility, as well as increase conversions and the bottom line of your business.
The good news is that with Ampd, you can eliminate 90% of the effort of launching and managing ad campaigns and amplify your return on investment. Get ampd.