Google Ads (once called Google AdWords) allow you to advertise on Google. Many experts believe Google Ads are the most effective way to reach people to advertise your business or products. One study found that Google Ads get you the most bang for your buck when compared to other forms of advertising, like radio or TV ads. Google says using their ad service works. In a large study, they found that businesses make an average of $2 for every $1 they spend on Google Ads.
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What Are Google Ads?
You’re probably most familiar with the Google Ads that appear at the top of search engine results pages (SERPs) after a person enters certain words into the search bar. They also offer other types of ads, including:
- Running your ad with a corresponding image when people check their Gmail.
- Showing any products you may sell when people search in Google Shopping.
- Running video ads in the middle of or at the beginning of a video someone clicks on through Google Videos.
So How Much Does It Cost to Buy a Google Ad?
The cost of an ad depends on what you’re willing to pay. There’s no minimum or maximum amount set by Google. The process works like this: You bid on keywords that people search for that are related to your business. There’s a chance (which we’ll get to later) that your ads will appear in Google search results. Then you pay whatever you bid if – and only if – the user clicks your ad to visit your website.
Let’s start with the average prices of cost-per-click (CPC) ads. In 2023, the average is $1 to $2 for the Google Search Network and $1 for the Google Display Network (that’s the websites, apps, and Google-owned properties like YouTube and Gmail).
Google suggests that beginners start small financially, and think about what they want to spend per day, then multiply that times 30 to figure out their monthly budget. Their help guide says, “To run your ads on Google, you’ll need to decide on the right budget and bidding options. Your budget establishes a charging limit for an individual campaign, so it should be the average amount you’d be comfortable spending per day.” They suggest setting a budget of $10-$50 per day, so the cost per month is $300-$1500. While Google suggests starting small, most experts agree that most companies spend $1000-$10,000 per month on Google Ads.
You can get a sense of what companies in your industry spend on Google Ads by taking a look at the results of this study.
| Industry | Average CPC (Search) | |
| Advocacy | $1.43 | |
| Auto | $2.46 | |
| B2B | $3.33 | |
| Consumer Services | $6.40 | |
| Dating & Personals | $2.78 | |
| E-Commerce | $1.16 | |
| Education | $2.40 | |
| Employment Services | $2.04 | |
| Finance & Insurance | $3.44 | |
| Health & Medical | $2.62 | |
| Home Goods | $2.94 | |
| Industrial Services | $2.56 | |
| Legal | $6.75 | |
| Real Estate | $2.37 | |
| Technology | $3.80 | |
| Travel & Hospitality | $1.53 |
What if I Don’t Want to Advertise to Everyone in the World Searching for a Specific Keyword?
Google Ads allow you to target people who live near wherever your business is located. For example, most people want lawyers who live somewhere near them, since laws vary by location. So if you are an estate lawyer in Illinois, your Google Ads could be focused on just those living in Illinois. You can even zero in on specific cities. Geo-targeting Google Ads will help you spend your budget more effectively.
What’s the Process of Bidding on Ad Words?
Ads appear or don’t appear, based on how much you bid for certain keywords. These are called Google AdWords. So, you will always be competing against others for the words or phrases, known as keywords, that you want to use in your ad.
When considering keywords, you also need to decide what keyword match type you want. A broad match may show on searches that are related to your keyword. An exact match is the specific keyword you’ve chosen. A phrase match means the keyword is implied.
When it comes to setting your budget, you have three ways to think about it.
- Cost-per-click (CPC): This refers to how much you pay when a person clicks on your ad.
- Cost-per-mille (CPM): This means you pay based on how many times your ad is seen by 1000 people, but not necessarily clicked on. (Some people prefer this strategy because it makes people aware of your organization, and later they may search Google for your company name and find your website to learn more).
- Cost-per-engagement (CPE): This means how much you pay when a visitor does something with your ad besides just clicking on it (signs up for a newsletter, makes a donation, etc.)
Google then takes your bid and analyzes it in conjunction with the quality of the ad itself. This is called a Quality Score. According to Google: “Quality Score is an estimate of the quality of your ads, keywords, and landing pages. Higher quality ads can lead to lower prices and better ad positions.” The score is between 1 and 10 — with 10 being the best score. The higher your score, the better. Your Quality Score combined with your bid amount creates your Ad Rank, which is the place your ad will appear in SERPs.
How Does Quality Score Affect the Cost of a Google Ad?
Here’s an example of how an ad’s quality score affects the price you pay for a Google Ad. Let’s say your maximum bid for a keyword is $2 and Google gives your ad a quality score of 8. As a result, your Ad Rank will be $2 x 8, which equals 16. In the auction, the person who has the highest Ad Rank wins the top advertising spot.
Google also uses Ad Rank to determine your CPC rate. The formula is (Ad Rank of the ad below yours) / (Your Quality Score) + $0.01.
Let’s say your maximum CPC bid is $2 and your ad Quality Score is 10, resulting in an Ad Rank of 20. Now, the bidder below you has a maximum CPC bid of $3 and a Quality Score of 9, which leads to an Ad Rank of 27. Calculating your CPC using the formula leads to (27 / 10) + $0.01, which equals $2.71.
Make sense? It takes a while to understand. Remember that at SEO Design Chicago, we’ve helped hundreds of companies develop effective Google Ad campaigns. We can help your company do the same!
How Do You Know Google Ads Are Worth the Investment?
Studies have shown that the vast majority of business owners are satisfied with the payoff from investing in Google Ads. To decide if Google Ads are working for you, you need to know your conversion rate. This is the percentage of website visitors who do something you set as a goal when they see your ad. You decide what your goals are. They can be anything from contacting your business to making a purchase.
Then, you calculate your conversion rate by dividing the number of people who completed a goal by the total number of people who saw or clicked on your ad.
Conversion rate = (conversions / total visitors) * 100%
For instance, if 10 visitors converted out of 1,000 who interacted with the ad, you’d divide 10 by 1,000, and your conversion rate would be 1%.
According to one study, the average conversion rate for Google Ads is 2.85%, but it really varies by industry. According to another study, companies should aim for the following conversion rates, each based on the occupational field the company falls in:
| Industry | Average CVR (Search) |
| Advocacy | 1.96% |
| Auto | 6.03% |
| B2B | 3.04% |
| Consumer Services | 6.64% |
| Dating & Personals | 9.64% |
| E-Commerce | 2.81% |
| Education | 3.39% |
| Employment Services | 5.13% |
| Finance & Insurance | 5.10% |
| Health & Medical | 3.36% |
| Home Goods | 2.70% |
| Industrial Services | 3.37% |
| Legal | 6.98% |
| Real Estate | 2.47% |
| Technology | 2.92% |
| Travel & Hospitality | 3.55% |
You can find out your conversion rate once you sign up for, or connect, your Google Analytics account with your Google Ads account. If you don’t have a Google Analytics account or haven’t updated your Google Analytics account to the latest version (called GA4), we can take care of this for you.
Help With Google Ads From SEO Design Chicago
Your Google Analytics account will provide all kinds of details about how effective, or ineffective, your Google Ads campaign is. If you don’t want to do this all on your own, you can reach out to the expert team at SEO Design Chicago.
We’ve helped many companies get great results from Google Ads. For example, one of our clients is an ATM machine installation company. They had invested in Google Ads but weren’t seeing the payoff. Their Google Ads were structured poorly and weren’t targeting specific locations. Our team rebuilt the campaigns and also removed a number of keywords that weren’t leading to conversions. The Google Ads campaigns are now structured with a mixture of Exact Match, Phrase Match, and BMM targeting keywords and phrases that lead to sales.They ended up with an 82% increase in year-over-year leads and a 145% increase in phone inquiries.
This can all be a little intimidating and confusing if you’re not familiar with paid advertising. Reach out to us so we can explain how we can start or maintain a Google Ads campaign for your business!
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