How Much Does Google Advertising Cost?

Deciding what to spend on Google Ads or other types of Google advertising can be a confusing question for many business owners and marketers.

Unlike buying an ad in the local paper or on a billboard, the costs per click and impressions on Google can vary significantly depending on many factors. This leaves advertisers wondering just how much we should budget for Google advertising.

In this blog post, we will explore the typical range of costs you can expect from the main Google advertising platforms. The prices for each can range quite a bit based on elements like competition, targeting options, ad formats, and more.

I will break down the key influencing factors, as well as industry benchmarks, and also discuss smart strategies local businesses and marketers use to optimize their ad spend on Google.

Important Statistics of Google Ads

Search Advertising Benchmarks: Averages across all industries

Source: WordStream

• Google recommends starting with a daily ad spend of between $10 and $50 for businesses that are new to advertising.
• $100–$10,000 is the average monthly cost of Google Ads for SMBs.
• Brands typically spend between 12% and 30% of their monthly ad expenditure on Google Ads management.
• $0.11–$0.50 is the average cost per click (CPC) for the Google Search Network.
• $6–$30 is the average cost per lead (CPL) for Google Local Services ads.
• 31% of businesses pay $0.51 – $1.00 per 1000 impressions on the Google Display Network.
• 25% of businesses pay $0.51 – $1.00 per 1000 impressions on the Google Search Network.
• 24% of businesses pay $0.11 – $0.50 per click on the Google Display Network.

Factors That Impact Google Ads Pricing

Industry

The types of products and services you sell impact how much competition and demand there is for Google Ads in your space. Sectors like law, finance, and other expensive B2B offerings often see intense bidding from advertisers.

When someone is searching for things like “401k advisors” or “medical malpractice lawyers,” the searchers likely have high commercial intent to buy or make a big purchase. Since the lifetime value of gaining one of these clients is so high, advertisers aggressively bid for clicks.

On the other hand, more informational, low-cost retail goods like consumer electronics or apparel have lower bids. The searches are still commercial, but competition varies based on product specificity.

Generic terms like “women’s clothes” or “laptops” are very affordable per click. You will pay higher prices for clicks on precise model numbers or branded goods.

Search Advertising Benchmarks 2023

Average Cost Per Click by Industry:

Source: WordStream

Market Trends

Broader market shifts also have a major influence as businesses spend more online. COVID greatly accelerated this digital transition across sectors, leading bids to jump industry-wide over the past 2 years.

Beyond external events, understanding seasonality also matters. Competitors aggressively bid higher around peak holidays and external events like Black Friday and Prime Day to capture surging conversion volumes.

Quality Score

This metric assigned to your keywords by Google (on a 1-10 scale) indicates the predicted quality and relevance of your ads.

Quality scores build into the on-page experience you send searchers from ads, like:

• How fast does your site load?
• If it has popups that block content.
• Your content’s depth and uniqueness.

Google analyzes engagement signals to determine if you helped or hindered the searcher’s intent. Higher quality scores allow your ads to maintain a position at lower bid maximums. So optimizing relevancy saves you money over time.

Keywords

Certain keyword types inherently command higher prices:

• Specific “long tail” phrases that tightly match unique consumer intent.
• Transactional keywords revolve around services like insurance enrollment or credit checks.
• Brand names for labels like Apple or Gucci that indicate commercial intent.

Generic, broad queries around generic topics have minimal competition initially. Rising demand for a niche area will then send bids upward over time organically. Continually monitoring search volume trends helps spot areas primed for targeting.

Bidding Strategies

Manually managing bids across a large portfolio demands extensive oversight to stay on top of market shifts. Using Google’s automated Smart Bidding options, use artificial intelligence to dynamically optimize bids based on your goals, like target conversion volumes or cost per acquisition.

This hands over bid precision tuning to algorithms to simplify management at scale. If you maintain manual oversight, you can set bespoke bid rules for your business.

For example, maybe data shows iOS visitors convert better for your app, so you systematically bid 15% higher for Apple devices.

Flexible bid factors like location, audience demographics, language, and more allow customization to your needs and ROI.

With both art and science applied to bidding strategies, Google Ads can achieve positive ROI efficiency for your specific market positioning.

How Do Google Ads Determine Your Cost Per Click?

Google Ads operates using an auction system for ad placements on search result pages. Advertisers set a maximum cost per click (CPC) bid for keywords, which acts as a support for what they are willing to pay.

But the actual CPC you end up paying is determined through Google’s ad auction algorithm, which takes several factors into account:

Your Max CPC Bid

This sets the upper limit of what you are willing to pay when someone clicks on your ad. You might bid $5 CPC for a highly commercial keyword like “refinance rates” for your mortgage brokerage.

While crucial for setting your ceiling, the actual CPC tends to end up below your max.

Ad Rank Calculation

Google assigns each keyword an estimated “quality score,” measuring the relevance and experience delivered by your ads/landing page.

Your max bid is multiplied by this quality score to derive an “ad rank.”.

For example:

Max CPC Bid = $5

Quality Score = 7 out of 10

Ad Rank = CPC Bid x Quality Score

Ad Rank = $5 x 7 = 35

Higher quality scores allow you to maintain rank with lower bids, saving money.

Competitor Bids

Google figures out where to insert your ad vs. other advertisers based on your ad rank relative to theirs. This determines the actual price needed to hold your ad position.

Say the advertiser just below you has an ad rank of 31 on that keyword. To keep your prime spot, Google will charge you just slightly above that – maybe $3.25 CPC based on minimum bid increments.

So while you were willing to pay $5 if needed, the algorithm tries to help you pay just enough – but no more – to capture clicks.

Your max CPC bid sets a deck. But Google tries to get you as much prominence and traffic volume as possible without overpaying relative to competitors (based on predictive click value powered by quality scores and conversion data).

How Does Budgeting Work With Google Ads Costs?

Budgeting is crucial for controlling overall Google Ads spending and pacing investments profitably over time. Campaign budgets can be set at the day, week, or month level to align with seasonal sales cycles.

Standard Delivery

This sets hard stops on spending once the defined budget cap is reached. Your ads then stop showing until the next calendar date, when the budget refreshes.

This allows precise control but leads to missed potential impressions between budget end dates.

Accelerated Delivery

This looks holistically at the budget you allotted across a wider period (typically monthly) and tries to spend it more evenly each day.

So it might start spending $100 per day even if you set a $500 weekly budget, estimating that’s needed to hit $2,000 for the full month without such drastic off-on fluctuations.

Budgets Tied to Conversion Goals

Rather than defining budgets based on arbitrary time frames or percentages, the best practice is to tie investment directly to return potential.

For example, given your profit margins and average order value, your target return is:

• Maximum CPA (cost per acquisition) of $200: This informs the platform how much you are able to invest per sale profitably. Google’s AI then uses that signal combined with conversion data to optimize bids to volume and position as many ads as possible under this constraint.

If you don’t import enough conversion data, you may instead first target cost per click or impression milestones.

Ultimately, optimizing for business KPIs matters most for tying ad spending directly to revenue opportunities.

Ongoing Optimization

Monitor both impression delivery and conversion rates closely within Google Analytics. If high-performing campaigns start hitting spending caps too early, expand the budget room for growth.

If CPA goals are exceeded by low-converting keywords, add negative keywords or lower bids in those areas. This dynamic budget and bid optimization in response to performance is crucial to maximizing ROI efficiently.

Google Ads Pricing: How Much Does A Typical Click Cost In Google Ads?

Unlike traditional advertising models with fixed placement rates, the beauty and complexity of Google Ads lie in the variable cost-per-click (CPC) pricing structure that shifts based on live auctions between advertisers.

This allows businesses large and small the opportunity to competitively bid for desirable search placement on relevant queries across Google’s vast empire of properties.

But just how much do these clicks typically cost? The answer can fluctuate widely depending on factors like:

• Industry vertical and business type.
• Seasonality, trends, and demand surges.
• Geographic considerations.
• Device type targeting mobile vs. desktop.
• Ad placement on Google itself or the broader display network.
• Level of targeting refinement and customization.

Average CPC Across Google Ads

Google reveals that across its millions of advertisers, the average CPC is approximately $1 to $2. However, individual business costs may vary drastically outside this range for multiple reasons.

CPC Differentials Between Industries

Consider legal services, financial services, or specialized B2B offerings where clicks represent highly qualified prospects. Competitors aggressively bid $50+ CPC attempting to capture clients with high lifetime values.

Contrast this with retailers spending just $0.25 to $0.75 for top-of-funnel product discovery. Industry dynamics drastically swing costs. Even specifics within sectors create huge disparities in generic informational medical terms for $0.15 vs. precision bidding around specialised treatments pushing $30 CPC.

Evaluating average CPC benchmarks vertically provides helpful context. But relevant factors like lifetime customer value, purchase intent indicated by keywords, and marketing funnels still differentiate optimal bidding strategies company by company, notwithstanding industry classifications.

Smart Bidding Optimization

Manual bid management can be extremely time-intensive given the vast competition levels across Google’s networks. Smart bidding automation uses machine learning to optimize bids based on conversion goals:

• Target return on ad spend (ROAS).
• Maximize conversion volume.
• Increase leads or sales.
• Stay within defined budget constraints.

Over time, smart bidding can significantly improve advertising performance and cost efficiency.

How Much Should You Spend on Google Advertising?

Determining the ideal ad spend depends heavily on conversion tracking capabilities, target return on investment (ROI), and seasonality or capacity for growth.

Set Target Cost Per Acquisition Goal

Factor in margins and desired ROI to set a cost per acquisition (CPA) or cost per lead target. This provides a budgeting guideline personalized to business needs.

As noted above in industry averages, CPAs can range from $1 to $100+. Define goals based on current conversions and opportunities.

Allot Budget to Maximize Opportunity

Consider industry benchmarks when setting a budget. Ultimately, pace spending to conversion uptake and expansion possibilities for maximum impact rather than fixed percentages.

Set an initial daily budget limit, then optimize based on performance indicators:

• Click-through rate (CTR)
• Conversion rate (CVR)
• Cost per conversion (CPC, CPA)
• Impression share

Expand the budget to fuel better-performing campaigns up to opportunity limits. Adding upper monthly limits prevents overspending.

Adjust for the Seasonality

Factors in sales cycles, new product launches, and consumer behavior shift throughout the annual calendar.

Allow flexibility in the budget for surges in high opportunity windows. Many brands orient the upper bound of budgets around peak Q4 holiday spending.

Conclusion

In closing, evaluating Google advertising costs depends heavily on strategic goals, industry context, targeting capabilities, and conversion tracking sophistication. As shown above, in the ranges cited, both very low-cost and high-cost outcomes can occur. Work closely with a Google Ads professional or ad agency to map investments to business objectives.

Define any key next steps with the right strategic guidance, Google advertising presents high ROI potential to reach motivated audiences where buying interest is strongest.

Reach out for a free consultation on developing an integrated, optimized Google Display Ads plan to make your specific market positioning and margins.