How much does it cost to advertise on Google?

Every marketer, business owner, or entrepreneur conducting marketing activities has probably asked themselves, „How much does it cost to advertise on Google Ads?”. After all, in a world where advertising plays a key role in business growth, understanding the cost mechanisms of the most important advertising platform, Google Ads, is crucial.

What are Google ads?

Google Ads, formerly known as Google AdWords, is an online advertising platform developed by Google. It allows companies to create and display ads on Google’s search engine results pages (SERPs) and Google’s ad network. With Google Ads, companies can reach a wide audience and target ads to specific keywords, interests, intentions, or demographics. The available targeting methods are designed to get the best possible result with a certain level of advertising budget.

How do Google ads work?

When users enter a search term, Google’s algorithm determines which ads to display and in what order. The algorithm takes into account various factors, including relevance, the quality of the ad, and how much an advertiser can pay per click.

Relevance plays a key role in determining the placement of an ad. Google analyzes the content of the ad, the keywords used, and the landing page to ensure that the ad is relevant to the user’s query. The more relevant an ad is, the more likely it is to be displayed and rank higher. Thus, a company can get more traffic for the same budget.

Ad quality is another important ranking factor. Google evaluates the quality of an ad by taking into account factors such as the ad’s click-through rate (CTR), but also historical performance or user experience on the website. Ads that provide a better experience will have a higher ranking. The higher the ranking, the more traffic.

Advertisements are also affected by the maximum rate that advertisers are willing to pay per click of their ads. Higher rates generally result in better ad positions, but other factors such as ad relevance and quality also play a role. So, theoretically, it could happen that an ad in the number one position will cost an advertiser less than in the fifth position. This simply means that the first advertiser gets much better results in ad quality and relevance.

It is worth noting that Google Ads operates on a pay-per-click (CPC) model, which means that advertisers only pay when someone clicks on their ad. This allows companies to control their advertising budget and track the effectiveness of their campaigns.

In addition to search ads, Google Ads also offers display ads, video ads, product (shopping) ads, and app ads. In most cases, CPC remains the primary billing method, but pay-per-view (CPM), visible display (vCPM), or conversion (CPA) fees are also possible.

The company’s billing method can be used to pay for display ads.

Competitiveness keyword

One of the primary factors that can affect the cost of Google Ads is the level of competition for a particular keyword. Keywords with high interest from advertisers tend to be more expensive. For example, according to a report by lunio, the most expensive Google Ads keyword in January 2023 was „offshore accident lawyer” with a cost of $815 per click! This high cost is due to the very intense competition between law firms, but also to the fact that a single contract from this sector can allow for a multiple increase in investment.

Keep in mind that the cost of keywords can vary depending on the industry, niche, trends, and competitive activity over time.

Quality Score

Another important factor affecting the cost of Google Ads is the quality score. This indicator, rated on a scale of 1 to 10, assesses the overall quality and relevance of the ad and the landing page. A higher quality score, in short, means lower costs and higher ad positioning.

Google takes several factors into account when calculating the quality score, including the click-through rate (CTR) of ads, the relevance of the ad text to the search term, the quality and relevance of the landing page, and the historical performance of the account (the latter factor is likely to be of decreasing importance).

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Geographic location

The geographic location to which you target your Google Ads campaign also determines the cost of your ads. The more competitive the area, the more you are likely to pay.

For example, if you run a local business in a highly competitive city such as Warsaw or Krakow, the cost per click of relevant keywords may be higher compared to a less competitive area. This is because companies in densely populated areas often invest more in advertising to reach potential customers (higher prices, higher margins, more affluent target group portfolios, etc.).

On the other hand, Google Ads reports will also allow you to find areas with lower competition, where the profitability of ads can be higher (lower competition, lower cost per click).

The average cost of Google Ads

So far, we have discussed what factors affect the cost of advertising on Google Ads. However, it is worth trying to catch a benchmark in terms of current absolute rates in several markets.

Google Ads primarily operates on a system known as cost-per-click (CPC), in which advertisers pay for each click of an ad. This means that you only pay when someone actually interacts with your ad (usually just clicks on the ad and goes to the site)

For CPC, Google Ads uses a bidding (auction) system in which advertisers compete for space. The higher the keyword bid, the more likely the ad will be displayed to potential customers in a higher position.

The higher the keyword bid, the more likely the ad will be displayed to potential customers in a higher position.

According to Wordstream data for 2023, the average CPC across all industries in Google Ads in the US market is 4.22 US. In Poland, in order to appear in ads at all (the lower ranking bracket) you need:

• for the phrase „children’s clothes” 82 cents;
• for the phrase „turnkey apartment finishing” 3 zloty and 7 cents;
• for the phrase „car rental” 79 cents;
• for the phrase „legal advisor” 1 zloty and 59 cents;

These examples show the variability of costs in Google Ads. When determining the advertising budget on the platform, you should consider your industry and competition. The Keyword Planner tool from Google should be your first port of call for budget planning.

How to define your budget

When it comes to budgeting your campaign, there is no one-size-fits-all solution. You need to consider factors such as the size of your company, your advertising goals, the level of competition, and your overall marketing budget. Always match it to the value, effect, and results you expect to get from the campaign.

One way to determine your budget is to align it with your potential in the market. For example, if you want to generate X conversions, acquire Y traffic, or reach Z people, a campaign planner will allow you to estimate what budget you need. In addition, you can adjust it, for example, until your campaigns get 500% ROI you can increase the budget.

It is important to remember to be flexible within your ad budget. When running Google Ads campaigns, you may need to adjust your budget based on the effectiveness of your ads and the results you are getting. Regularly monitoring and analyzing your campaign data will help you make smart decisions and increase your chances of getting a better return on investment.

How to manage Google Ads spending

One way to manage spending is to regularly check the effectiveness of your ads and adjust your rates accordingly. By analyzing the data, you can determine which keywords and ads are effective, and allocate more budget to them, while reducing the budget for keywords and ads with low effectiveness.

Another aspect to consider is the quality of your landing pages. By improving the relevance and user experience of your landing pages, you can increase the chances of conversions and lower the cost per click. Focus on the mobile experience, site speed, and ensuring information transparency.

Experimenting with ad text is also a strategy for lowering ad costs. By testing different variations, you can get a sense of which messages are best suited to your target audience, and optimize your ads for better effectiveness.

The ad text is also a great way to reduce costs.

Ways to cut Google ad costs

An effective strategy for lowering Google Ads costs is to improve your quality score. The better you build your account structure, write more relevant ads, improve your site, and provide a better user experience, the easier it will be to lower your costs in Google Ads, but also increase your conversion rate. This method is also the most versatile and long-term.

Another strategy to consider is to choose less competitive keywords. When you target ads to highly competitive keywords, you are likely to face a lot of competition from other advertisers, which can raise the cost of your ads. By choosing less competitive phrases (long tail), you can lower your costs while not lowering your return on investment.

Using exclusionary keywords is another effective way to reduce Google Ads costs. Exclusionary phrases help you get rid of ad impressions and clicks in inappropriate contexts. By adding exclusions to your campaigns or ad groups, you can prevent ads from appearing in search results that are not related to your products or services. This reduces the number of empty clicks and ultimately reduces costs.  The budget you save can therefore be allocated to other campaigns or marketing activities.

Statistically, the amount of Google Ads costs is very subjective – it depends on your business, your goals, and how effectively you use the platform. If you are able to set up your Google Ads campaigns in such a way that they generate the expected return on investment, the CPC rate will not really make any business difference.