Wondering how much Google AdWords costs

By Jennifer Chan

It’s a question we hear all the time, usually driven by another: “Is Google AdWords worth it for my small business?” Our not-so-secret formula for determining the value of AdWords for small businesses can help you answer that second question. In order to complete the formula, however, you’ll need to have a general idea of how much a qualified lead from Google AdWords will cost you.

Some facts:

  • Among companies on the 2014 Inc. 5000 list, the average revenue spent on pay-per-click per month was only $1,700.
  • The biggest 2014 Inc. 5000 spender was GoDaddy, with a monthly spend of $438,508.
  • For a roofing contractor in San Rafael, Google estimates $759 per month for 142 to 238 clicks.

Remember: a click is not the same as a quality lead. A click can come from anyone; a quality lead, on the other hand, is a user who is genuinely in the market for the service or product you sell.

  • The average cost per click (CPC) across all industries on the search network is $2.32.
  • CPC varies greatly depending on industry and location. Clicks can average as low as $.19 per click for dating/personal services and up to $5.88 for legal services.
  • The average CPC for “best mesothelioma lawyer” is $935.71

So, how much does it cost to advertise on Google? Any answer to this question needs to be prefaced with an explanation of how ads are sold on Google.

Ad Rank and the Google Ad Auction

Which ad gets shown to which user is determined by auction every time an ad is shown. When a user types words into Google’s search engine bar, Google takes a nanosecond to compare all of the ad campaigns vying for placement for those keywords. The auction winners are rewarded with the top spots on the Search Engine Results Page (SERP).

But unlike Sotheby’s, winning bids aren’t determined solely by the amount of money a bidder is willing to spend. Instead, Google uses a complex (and secret) algorithm to determine what they call “Ad Rank.” In theory, bidders with the highest Ad Rank appear highest on the SERP. So, when I type “puppies for sale” in the search bar, puppyfind.com and puppyspot.com appear at the top of the SERP because they have the best Ad Rank.

Ad rank determines how much it will cost you to advertise on Google

 

Clearly, optimizing Ad Rank lowers the costs of advertising on Google. You can do that by creating a campaign with Ad Rank in mind.

 

Google says Ad Rank is based on a number of factors:

  • Your bid: How much you’re willing to spend on that particular impression of the ad
  • Auction-time measurements of expected click-through rate: The extent to which Google believes the user will click on your ad
  • Ad relevance: How relevant Google judges your ad to be to a particular user
  • Landing page experience: How relevant and optimized is the landing page (your website) to the ad-clicker?
  • Other factors

 

Optimize the factors within your control and your costs will be lower.

But this still doesn’t answer the question. How much does it cost?

Here are some ways to guess how much Google Adwords will cost you:

  • The Keyword Planner tool within the Google AdWords platform should be the first place you turn. In order to use Keyword Planner, you’ll need to set up an AdWords account, backed by a credit card (you don’t actually have to spend anything to access the free tool). Not only will Keyword Planner suggest possible keywords for your campaign, it will also give you an estimate on how much these keywords will cost. You can even upload your own keyword lists for an estimate. Bear in mind, however, that the Keyword Planner estimate is really just that: a very rough calculation to use as a starting point.
  • There are many free alternatives to Keyword Planner, but to get the best results, you should use them in conjunction with Keyword Planner. Some of these tools include Moz, Keyword Spy and SpyFu.
  • Finally, the best way to figure out how much a Google AdWords campaign will cost is to run a Google AdWords campaign. Your CPC will be based on many distinct factors. Some of these are marginally within your control (such as Ad Rank) and some are completely beyond, such as your industry, the competition in your area and your customer demographics. If you can dedicate $400-$500 to running a test campaign for a month, do it! However, make sure you have a way of tracking incoming clicks and determining whether or not they become leads. Otherwise, your results will be meaningless (see above). Your results after one month won’t tell the whole story, as Ad Rank improves over time. But if you’ve set up your campaign correctly, you’ll get a fairly good sense of how much you need to spend to generate quality leads with a Google AdWords campaign.

Good luck! And if you have any questions, don’t hesitate to get in touch.

If you’re interested in running AdWords for your business but don’t have the know-how or time, we’d love to do it for you. Email us or call Nancy at (707) 575-5373.

To read more of Jennifer Chan’s work, check out her writing for the Diamond Certified Blog.