If you’ve been trying to grow your small business, then you should be aware of the potential pay-per-click advertising holds. Unlike search engine optimization or social media marketing that take a lot of time to show results, PPC can help you put your business in front of the right audience and get qualified traffic and leads to your website quickly and effectively.
What most business owners want to know, especially those who are new to paid search, is how much Google AdWords is going to cost them. After all, we all heard stories of companies that invested in ad campaigns only to see their resources wasted with no results to show for in the end. Evidently, you don’t want to become a case study for “how not to use Google AdWords.”
Let’s get one thing clear right from the start: Google advertising has the potential to generate a high return on investment. According to Google reports, the average advertiser doubles their investment rather quickly. In other words, you will get $2 for every dollar invested. But, here’s the twist: you can benefit from this impressive growth only if you know how to set your ads and manage them effectively. And, that’s where the difficult part lies in.
So, let’s take an extensive look at how Google AdWords works and how you can set a campaign to generate maximum returns.
How Does Google AdWords Work?
Before we dive into the costs of running an AdWords campaign, let’s try first to understand how this platform works.
One of the biggest misconceptions about AdWords is that you need to invest a lot of money to see significant results. While a massive marketing budget certainly won’t hurt, it’s not a prerequisite for running effective ad campaigns. Anyone from small businesses to giant retailers can advertise on this platform and see great returns on their investment. One of the reasons is that you don’t pay for impressions, meaning whenever prospects see your ad, but when they click on your ad.
Here’s a quick look at the process of setting your ads and bidding for keywords.
- The Auction
Every time a user enters a query into the search engine, Google will run an auction to determine which ads are the most relevant to the searcher’s needs. It does so by considering a variety of factors, such as the Quality Score and Ad Rank.
If multiple advertisers have placed a bid on the same search term, then Google will look at their Ad Rank to determine the position of each ad in search engine results and the average cost per click.
Google will determine the Ad Rank by looking at your Quality Score and maximum bid.
The exact formula looks something like this: Ad Rank = Quality Score x Maximum Bid.
We won’t get into the nitty-gritty of the Quality Score and its influence on your AdWords campaign, but we will tell you that factors such as the relevance to your keywords, the quality of your ads, the design of your landing page, and the click-through rate play an important role in this equation.
How to Calculate My AdWords Budget
Here’s an example to help you understand the auction process better.
If your maximum bid for a certain keyword is $5, and your ad has a Quality Score of 9, then following the formula above, your Ad Rank is 45. If another advertiser will want to get a higher position in search engine results than you, then it has to obtain a higher Ad Rank.
Here’s another thing that you need to consider: the advertiser with the highest Quality Score will end up paying less for a higher position. So, making sure that your keywords are relevant to your audience needs and that you have high-quality content on your landing page will lower your maximum CPC.
If you’re not sure what keywords you should bid on, then a tool like Google Keyword Planner could help you understand what prospects are looking for online. Keep in mind that the keywords with the highest search volumes usually come with a hefty price. Moreover, a high search volume isn’t necessarily a guarantee that your ads will convert.
Try to think about it this way: the keyword “dress” has an impressive search volume, but how many of the people typing this word in are actually looking to purchase. Instead, a long-tail keyword, such as “designer women dress for sale” targets a specific intent and is more likely to generate results than a vague key phrase.
How Should I Spend My Budget?
More often than not, newcomers spend their entire marketing budget in a flash, leaving them with a bitter taste and the impression that Google AdWords is just a huge waste of money. The problem, however, isn’t that paid advertising is ineffective, but they don’t know how to budget and control their spending.
An excellent way to get started with AdWords is on a per-campaign basis. Simply put, you should allocate a daily budget for each AdWords campaign you create for a specific keyword. Make sure to prioritize your campaigns and set a higher budget for the best-selling products.
Here’s an example.
Let’s imagine that you have an ad with a CPC of $0.5, and you wish to get 100 clicks per day. You can calculate your daily budget as $0.5 x 100 = $50.
Remember that several factors can influence the overall costs of your campaign, so try to anticipate them and stay on top of them.
Budget Control Practices
One of the things that make Google AdWords such an amazing advertising channel is that it allows you to customize your campaigns as per your liking. For example, because there is no minimum budget required to advertise on Google’s search network, you have total control over how much you want to spend and how.
If a campaign generates a high ROI, then you can always increase its budget. On the other hand, if it’s underperforming, then you can scale it down. So, take advantage of the extensive Analytics platform Google offers to determine the performance of your ads and the action that you need to take.
Industry Impact on Ad Costs
The average cost per click will vary depending on your target market. In highly competitive industries, such as insurance, Google (and even Bing ads) can cost as much as $50 per click. A top company in this industry can spend up to $50 million a year on Google AdWords alone.
However, you don’t need to spend millions to make it work. Even a small monthly budget of $1,000 can bring an excellent ROI.
There’s no definite answer to how much Google AdWords will cost you, and that’s a good thing. It means that you can customize your budget to fit your needs and spend as much as you can afford. What matters is that you learn how to create high-quality campaigns and manage them effectively.
Mastering AdWords can take time. If you would rather spend your days focusing on growing your business, then let the experts at Australian Internet Advertising take care of your PPC needs for you. Check out our services and schedule a free consultation today.