If you are just getting started with online advertising, you may be wondering how much it costs to put ads up on Google. The first step is to understand what your options are as an advertiser to decide which platform makes the most sense for you, your business, and your ad budget.

Google AdWords

AdWords is Google’s main advertising platform for businesses and accounts for roughly 89% of Google’s total revenue. AdWords and related ad products generate nearly $60 Billion each year for the company in 2014. That’s a lot of moolah! It’s safe to say their ads are being used widely by advertisers, otherwise Google wouldn’t be growing ad revenue at such a pace.

Little Blue Links

Perhaps you have seen the blue links with the “Ad” icon? Google at one time used a yellow post-it note background for its ads, now it just puts “sponsored results” or “ads” next to the results. You may be asking yourself, “well, can’t people just see that its an ad and skip over it?”. Past studies have shown that in some cases, Google searchers don’t know the difference between paid and organic search results.

google-adwords-cost

DIY AdWords

A majority of DIY advertisers start with a basic keyword campaign in AdWords with a modest budget of $25-50 per day. They pick a few dozen keywords using Google Keyword Planner and create one or two basic ads. After a few hours or so, they have an ad up and running on Google.

“…they are just buying a lot of unwanted clicks in order to get a handful of good leads”

The problem with this approach is there is very little strategy or targeting used. Most advertisers new to AdWords are not familiar with the powerful features of the platform to decrease their cost-per-lead. Most just see a lot of clicks coming from Google and think “Great! I’m on the road to riches”. In reality, they are just buying a lot of unwanted clicks in order to get a handful of good leads. Before you give up on AdWords after a few months, talk to a professional. Someone experienced in AdWords management and help you reach your goals.

For most companies starting out, $500-1,000 a month in Google AdWords pay-per-click ads may seem like a lot of money. In reality, that budget is a little low.

AdWords Budgeting: How much does it cost?

For most companies starting out, $500-1,000 a month in Google AdWords pay-per-click ads may seem like a lot of money. In reality, that budget is a little low. Unless you’re running a local pizza shop, $500 isn’t going to go very far. Most industries have a $80-300 cost-per-lead when they are starting out with AdWords. That means that they will only get 3-5 leads on a good month. Perhaps 1 or 2 of those leads will turn into real business. If your business needs more than 5 leads from Google just to pay the bills, this becomes a problem.

Below are a few examples of different industries and what you can expect from $3,000 per month in Google Adwords based on cost-per-click (CPC) and average conversion rates:

Competitive Legal Website ($20 average CPC)

Ad Spend $3,000 / 150 clicks = 12 leads

Less-Competitive B2B Website ($5 average CPC)

Ad Spend $3,000 / 600 clicks = 48 leads

Competitive E-commerce Website ($2 average CPC)

Ad Spend $3,000 / 1,500 clicks = 30 sales

Competitive Pharmaceutical Website ($60 average CPC)

Ad Spend $3,000 / 50 clicks = 4 leads

“When planning a budget for AdWords, start with your goals (or desired sales) and work backwards”

Keep in mind to reach these type of numbers you will need someone running your campaign that knows what they are doing with a few years of experience optimizing AdWords. I would not give these projected numbers to someone new to AdWords and expect the same results.

When planning a budget for AdWords, start with your goals (or desired sales) and work backwards. Our team can help you forecast what it might take to reach those goals based on things like search volume and your current Google Analytics data. From that point, you can decide how much you’re willing to spend to reach those goals. A good measure of performance is cost per sale or cost per acquisition.

Average Cost Per Acquisition

Ever wondered what the average cost per acquisition was in your industry? WordStream released a recent study that shows the average cost by industry. How does your current campaign measure up to the average?

google-adwords-industry-benchmarks

AdWords Default Billing

Wether your daily budget is $10 a day or $800, the default billed spend is set to $500 or 30 days, which ever comes first. At the end of the 30 day period or when your balance reaches $500, you will be billed for the balance remaining in your account. You have the option to pre-pay with credit card to avoid seeing lots of $500 charges in your credit card each month. If you average a spend of $5,000+ for a period 3 months, you can request a line of credit from Google. At that point, they will put you on invoicing rather than charging your credit card each week. This is a good option for companies looking to avoid the hassle of dealing with several monthly charges.

Google AdWords Express

For those DIY advertisers I mentioned earlier in the article, Google provides a do-it-yourself ad platform called AdWords Express. Warning: This platform is a dumb down version of full Google AdWords, intended for small mom and pop shops with small budgets. If you have a business that generates $10 million or more a year, this is not a good option. You will be very limited by the lack of features. If you ever wanted to hand an Express campaign over to a professional, they may ask you to start all over with full AdWords.

Google uses the “Pizza” shop example for a reason!

pizza

Once you’ve entered in the basic information, Google will auto-generate a campaign based on what you input. There are great local features included in Express for local businesses. The challenge with this platform is the features. Like we mentioned before in the DIY Adwords section, you may end up just buying clicks with a poor return on your ad spend.

Google Search Network

One small change inside the AdWords settings opens up your campaign to the Google search network partners. This may not be a good first step if you’re just getting started. This small change will open up your ads to all sorts of partner websites where your ads will appear.

search-network

In my experience, the network partners are slightly cheaper clicks but may not generate the same results as “Google only” searchers. After you’re comfortable with the main search network, test out what impact this feature will have on your campaign. It could drive up your cost or help you lower your cost-per-lead.

Google Shopping

If you have an online retail business, Google Shopping may be good option. Google Shopping ads appear for product searches based on your settings and bids, similar to how Google Adwords works.

pizza-rat-2

Your budget for these ads may be similar to the budget you have for keywords on Google AdWords. Since the two ad products are connected, you can manage how much you’re spending on Shopping Ads vs. Keyword Bids. Careful not to over-bid on these campaigns since they can really dig into your monthly budget. If you don’t have a budget of at least a couple $1,000 to cover AdWords + Shopping, then you probably shouldn’t bother setting up Shopping ads. Wether you choose to test Google Shopping can depend on how many products are in your catalog. Without enough product in your Shopping feed, you may see lack luster results.

Google Remarketing & Display

Part of the AdWords platform is what’s called Remarketing and Display advertising. If you’ve ever shopped for a car and find that car following you all over the Internet, you know what I mean. These ads will be featured in the display banner ad section of most media websites base on what the advertisers bid.

vw-ads

I would only recommend Remarketing or Display advertising to a company that is already doing well with AdWords or a Shopping campaign. Display isn’t going to drive 1,000s of conversions. Display helps with Brand awareness and may lead to more Brand searches over time. Remarketing, if done correctly, can be a great way to offer deals to your customers to bring them back. Without incentive to return, your Remarketing campaigns can fall flat.

Additional Resources

Below are some additional resources you may find helpful when building your Google AdWords pay-per-click strategy and budget.

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