How Much Do Google Ads Cost & What To Do About It | 2021 Breakdown

One of the best ways to generate leads online is to show targeted Google Ads whenever your target prospects search for a solution your business provides. But how much does it cost to advertise on Google? And is it a cost you can sustain until you see a positive return on your investment?

Even as a person new to pay-per-click, you probably heard about the?impressive $8 to $1 return on investment (ROI) Google estimates for their advertisers . However, before you start advertising, you must understand the upfront costs of running Google Ads for your business, as well as the expected return.

By the end of this article, you should get a clear idea of whether it's the right time to advertise your business on Google and how you should plan your ad budget to maximize your return from the get-go.

Let's dive in.

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The Hard Costs Of Google Ads

Although it's often said that there is no minimum spend & you can set a budget that works for you, the reality is you don't start advertising to "be in control of your marketing budget." You start advertising to make money off of it.

When it comes to making your ad campaigns profitable,?there is a certain threshold you need to hit: you need to get enough (relevant) clicks, convert those clicks into leads, and then turn those leads into paying customers. And for you to have the best chance for success, you need to know your numbers. Each part has a number associated with it.

The first place to start is your hard costs.

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How Much Can You Realistically Spend Each Month?

In business, we all have two hard costs: time and money.

If you don't have money to invest in getting new customers, then Google Ads is not for you.

If you have money to invest, ask yourself: "How much can I realistically spend on Google Ads in the next 3-12 months without needing an immediate ROI?"

Tricky question, I know, but it'll help you get your thinking right: you create an asset for your business, a lead generation funnel you'll be using for years on end. You must pick an ad budget you can sustain month-by-month, even if you don't see an immediate return in your first months. It'll pay off multifold?once it starts working .

Remember, your number is not set in stone - pick a minimal ad budget you can invest each month on Google Ads, and if you choose to go above it, you can (don't go below your minimum until you got your campaigns profitable).

Did it? Great. Let's go to the next part.

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How Much Do Your Target Keywords Cost?

The most straightforward way to generate a good return on Google Ads is by using Search Network campaigns. They are structured around keywords. Knowing your hard costs numbers starts with estimating how much a click to your target keyword will cost you (i.e., what's the price of a click from a warm prospect who just Googled a solution your business provides).

For example, if you run a plumbing company, your ideal prospects would search for "plumber near me" or "urgent plumber help."

You can use a few tools to find the terms related to your business solves for people.

The simplest of them all is Google Keyword Planner in Google Ads. It's a free tool & contains a lot of valuable data from all the advertisers across the globe.

To access it, head to your Google Ads account & open up the keyword planner:

Now you can put a few of the main keywords you already know or copy-paste your website or landing page (if you have one) to get new keyword ideas. You can also use your competitor's website to get new keyword ideas (don't tell them.)

Another helpful tool you can use is?SEMRush .

Just open it up and start typing in the terms related to your business. You'll get tons of valuable data on cost per click.

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A Few Rules For Choosing The Right PPC Keywords

You should aim to get 10+ clicks/day from your search campaign. And they need to come from?quality traffic.

Let's go over a few simple guidelines you can use to choose the right keywords & estimate your avg. daily cost:

• The keyword has to buy intent behind it
• The keywords have a good monthly search volume
• The 1st page (low end) CPC fits with your daily budget.

If you got 3-10 main target keywords with 10+ clicks/day estimate, you're in a good spot. Export them in a spreadsheet (you'll need to prepare relevant ad copy later and keep your research in one place).

If the estimates show that you'll get less than ten clicks/day, you should reconsider your monthly/daily budget.

P.S. 10+ clicks/day is a?minimal number. If you can afford to pay for more traffic, then do so:?higher traffic volumes = faster tempo of testing = more immediate results.

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Are You Planning To Delegate PPC Management?

If you plan to get professional PPC management services, training, or a software solution, you should add it up to your hard costs. If you are starting, I recommend trying it out yourself on a limited budget before you start working with a professional?PPC Agency .

As for the software, if you're a new advertiser, chances are you don't need any PPC management software. Google's free tools are more than enough to get you to succeed, so cut them out from your hard costs, at least for now.

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Factors That Determine Your CPC

Several factors determine your average cost-per-click. Here are the main ones.

Your Industry

The CPC for industries like Law or Automobile sales would be much higher than if you would be selling shoes or pizza.

We recommend checking?Google Ads benchmarks for your industry ?so you see how much other advertisers are paying.

Your Location

Where are you advertising? Are you advertising in a small neighborhood area, or are you advertising in a metropolitan area with millions of people who can potentially see your ads? When there are more people – there is more competition (unless you have a monopoly on the market, of course).

Your Keyword Quality Score

Although most of your results shouldn't come from improving?ad quality scores , it still can impact your pay-per-click economics. Here are the main things you need to know.

Quality Score is calculated based on the combined performance of 3 components:

1. Expected clickthrough rate (CTR):?The likelihood that your ad will be clicked when shown.
2. Ad relevance:?How closely your ad matches the intent behind a user's search.
3. Landing page experience:?How relevant and useful your landing page is to people who click your ad.

Let's break down what you can do to improve your overall quality score through each component.

Expected clickthrough rate (CTR)

The first variant is a tricky one since Google uses their own database they've developed over the years to estimate the chances of this ad being clicked. Although there are some ways to improve this score, they are experimental, so I suggest ignoring this variable until you improve the other two.

Ad relevance

You can improve your Ad Relevance score by including your target keyword in the headline, description & path of your ad. As long as it reads well (i.e., you're not keyword stuffing), you should get a boost in your ad relevance score in the following weeks.

Remember, Google's mission is to organize the world's information and make it universally accessible and useful. If you make your ad transparent & be clear about what you are trying to sell, they will reward you with lower CPCs.

Landing page experience

Does your landing page reflect what you're selling? Do you send the people looking for a specific service to a dedicated service landing page (or a general home page)? Does your landing page have the main keyword & general context that the keyword intent represents? Does it match what your ad is promising?

These are all factors Google measures when it comes to landing page experience.

Apart from improving the above, it's also crucial that you set a measurable conversion action you want people to take and optimize both your ads & your landing pages for a good amount of those conversions. Google also measures if people are staying & taking action on your page. And if people bounce back immediately after clicking your ad, you'll have a problem with the quality score. Make it easy for people to find what they need, and Google will reward you.

Quality Score Is A Good Thing

Don't be frustrated by all variables described above. The main point is simple: give people what they're looking for, make a good offer. Thanks to this principle, small businesses with relevant ads can outperform large companies in CPCs.

As long as your ads are attractive, relevant & people are taking the desired action on your website, Google will lower your CPC because you're giving the end-user what they're looking for.

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What's The Upside Of a High CPC?

Advertising on Google is not for everyone. Some might think the costs are too high, and?that is a good thing.

You see, many people get distracted by costs and forget that because there is a higher barrier to entry, many people get discouraged and leave. And if you're one of those who instead focus on what potential return your advertising campaigns can generate you, the costs won't mean the same thing to you as they mean to them.

As long as you commit to making this work, allocate a realistic (and sustainable) monthly budget, optimize your campaign performance in a matter of a few short months, you'll be generating 10x more leads for the same price (or less). All, while your competitors got discouraged & are sitting cold-calling potential prospects 5 hours each day.

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How To Set An Optimal Google Ads Budget

Now that you know your hard costs & CPC factors, let's talk about how you can set an optimal ad budget for your business, considering where you're currently at and your business goals.

Invest in Google Ads in direct proportion to how much profit they're currently generating & how much profit they can generate once they're well optimized.

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Calculate Your Expected Return

Let's say you're monthly budget for Google Ads is $1500/month. How many relevant clicks can you get for that budget?

Look at the average CPC of your target keywords. Let's say it's $2. That means that for $1500, you will get 750 clicks/month.

Now, you need to determine how many leads you would get out of that number that you determine by looking at your average conversion rate.

Most accurate, of course, would be the number you see in your marketing funnel. But if you are starting or running ads without measuring this, there are good resources online where you can check the?avg. conversion rate in your industry .

For example, purposes, let's say you are in the B2B space & your avg. conversion rate is 3%. This means that for $1500, in 1 month, you should get 23 leads.

How much revenue will those leads bring to your company? This depends on a few other factors: how many of those leads are qualified, your avg. client LTV, what's the average conversion rate in your sales process.

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Making Google Ads Work Is A Process (not a sprint)

Some of you might rush into figuring out your target CPL based on what your Client LTV is. And although it's good to know this number, don't become overly obsessed with hitting that number right away.

Chances are, the results you would be getting in the first months of running Google Ads won't be the same as you would get 3-to-6 months down the line (if you optimize the right way, of course).

If you know, Google Ads has the potential to bring you quality leads & kickoff your sales to a new level. Then it makes sense to keep running Ads longer, even if the target CPL number is not ideal. The numbers would improve over time.

With getting new clicks to your funnel, you can see what works & what does not. You will use this information to optimize performance. This way, with time, you should be able to see a decrease in CPC & an increase in conversion rate. That's how you get more leads & sales for the same ad budget.

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Conclusion

1. The first place to determine if Google Ads costs are worth it for your business is to look at the funds you have available right now. How much can you realistically invest each month without getting an immediate return?
2. Check how many relevant clicks your current ad budget can bring you and how much revenue they will likely get to your business. Once Google Ads start working for you, will it justify all the costs?
3. Know the main factors that determine your CPC. Improve them & you'll get more clicks for less cost.
4. High CPC can be a good thing. It weeds out weak businesses and makes committed people succeed.
5. Don't freak out if you're not getting your ideal Cost-Per-Lead right away. Your Google Ads numbers will improve over time, as long as you're using the data to optimize your performance.

Are Google Ads worth it for your business? Did you use a different process to figure that out?