How Much Should You Spend on Google Ads?

Google Ads is a fast and effective way to drive traffic and generate sales leads. But whether or not your campaign generates a return on investment depends largely on how much you have to pay for each click on your ad relative to what you can earn in profit from that traffic. So let’s look at what determines costs in Google Ads.

Competition Drives Cost-Per-Click (CPC)

The cost-per-click (CPC) is the amount that an advertiser pays each time someone clicks on their ad. This cost is determined by a variety of factors, including competition in the targeted keyword space, geographic location, and quality score. The quality score measures the relevance and usefulness of an ad to its intended audience; higher scores usually equate to lower costs-per-click. This is because Google is dedicated to ensuring that those who use its search engine get the highest quality search results with no surprises when they click through to a website.

It’s important to note that CPCs can vary significantly depending on the industry or business sector; for example, “online MBA” costs over $20/click. Another expensive keyword is “car insurance quote” which is almost $25/click. These search terms are very expensive because they are in demand with many deep-pocketed advertisers bidding on them. And remember, the cost of Google keywords is largely determined by auction where competition drives up costs.

Budget for Google Ads

Google Ads requires advertisers to set a monthly budget for their campaigns so they don’t overspend. It’s important to choose a budget that is realistic and achievable given your marketing goals and objectives, as well as your current financial resources. This means figuring out how much a website visit or conversion is worth to your business. Car insurance companies can make money on leads that cost over $20. What’s your profit threshold?

I recommend starting with a wide range of keywords at a variety of different costs, then narrowing them as the campaign progresses. And once you find keywords that drive traffic and conversions, start spending more to increase the volume of those.

Planning and Monitoring Costs

When I set up a campaign, I use SEMRush to see how much keywords cost. The Keyword Magic Tool provides a snapshot of estimated costs. And once a campaign starts running, I use the Google Ads Dashboard to monitor costs regularly to see which keywords are driving the most activity and how much they cost. Sometimes I’ll see a very expensive one and I’ll pause it to bring down the overall campaign cost. Once I ran an employment campaign and saw that 95% of the traffic was being driven by one search term- an expensive one! But knowing that the term drove so much traffic, I left the campaign alone and kept spending behind that term.

Google Ads is a powerful digital marketing platform to reach low-funnel sales prospects. But without careful planning and monitoring of costs, these campaigns can drive low-quality traffic and waste your budget. So plan well and monitor often!

This post was written by John Walker, Principal at J. Walker Marketing, a marketing consultancy. Contact John directly to discuss your marketing challenges.