Google Ads cost: how much does it cost to advertise on Google?

Advertising on Google and its affiliated platforms can be a complex business, with a myriad of factors and caveats influencing pricing, such as keyword competitiveness, ad quality, targeted demographics and timing.

While it can often feel like a minefield, advertisers are able to control spending through daily budgets and maximum bids, making Google Ads a relatively inclusive and manageable platform for businesses of all sizes. This is all well and good, but if you’re entering the world of paid search advertising without some understanding of the costs involved, it’s possible you’ll end up with a hefty bill and completely bamboozled by it all (we’ve all been there!).

In this article, we’ll take a closer look at the various factors that play a part in determining advertising costs on Google and explore how budgeting works within Google Ads.

Table of contents

• What does pay-per-click (PPC) mean?
• Factors that impact Google Ads pricing
• How does budgeting work with Google Ads costs?
• Cost breakdown of an example campaign

What does pay-per-click (PPC) mean?

Pay-per-click (PPC) is a form of marketing activity where businesses pay a fee every time somebody clicks on their ads. Unlike SEO, which is applied to attract visitors to your site organically, PPC (specifically Google Ads in this case) enables brands to gain instant visibility across Google's search engine results pages (SERPs).

These ads can be found in various locations, typically the top of the SERP so they’re the first thing the reader sees when they make a search. They’re also found at the bottom of the SERP too and across the Google Display Network, including YouTube.

The cost to advertise (known as cost-per-click or CPC) serves as a financial metric to measure the overall cost of each ad click for a campaign and is determined by an auction system where businesses can bid on keywords relevant to their target audience. Unlike your everyday auction though, it’s not as simple as ‘whoever bids the most, wins’. CPCs are calculated based on a number of factors which we’ll explore in more detail below. It’s not uncommon in certain industries, like insurance or law, for clicks to cost hundreds of pounds!

Factors that impact Google Ads pricing

There are several factors which can impact Google Ads pricing, including keyword competitiveness, ad quality, complexity of campaign, targeting specifics (such as location and demographics) along with the size and age of the Google Ads account.

Google’s Keyword Planner can be used to try and estimate the cost of a click when doing research into possible phrases to target but isn’t hugely reliable when it comes to real world situations as there’s no guarantee as to how much each click will cost each individual business.

Here are some of the other primary factors that can make the cost of your clicks on Google go up or down:

Industry

There is no one-size-fits-all cost which works across the board, with figures often varying wildly from industry to industry. In recent years, Google Ads has reached the point where the industries that get the most return on their spend, also tend to pay the most. Depressingly, phrases around medical compensation or online casinos, for example, tend to reach tens of dollars per click as the advertisers know that in the long run, they will eventually make a substantial financial gain from the leads they generate.

Other industries where the expected value of a new customer is lower (let’s say toiletries or budget food produce), will pay far less as it’s just not feasible to spend more than a specific, capped amount.

Google advertising costs by industry

That being said, research has been carried out over many years to try and break down the costs of advertising on Google by industry, with the often often-cited example below from Wordstream considered by many to be the ‘go to’ when it comes to costing benchmarks.

Admittedly, this is maybe a year or so out of date, and yes, it’s for averages of advertising in the US, but you get the gist. We must also highlight this only shows averages and so doesn’t reflect what each individual advertiser pays. If you’re ever in doubt or curious about what it might cost to advertise your business, then speak to a PPC expert who can give you a more specific example relevant to your industry.

Location

It’s a bit of a no-brainer, but the more affluent the location, the higher the value of a click for that specific region. So, for example, it’s going to cost more to bid on ‘flat to rent in london’ than it is to bid on ‘flat to rent in lincoln’ where rental prices are considerably cheaper. Remember, the cost you pay for a click is always going to depend on how savvy (or not!) other people are in your auction, so there may well be the chance to bid lower and spend lower in certain areas where your competitors might not be as experienced.

Customer Lifecycle

Depending on how close to conversion you want to be, or how much budget you have to spend, the amount you pay will vary depending on where your customers are in the buying journey. What does this mean? Well, in the travel industry for example, people will typically go through the following phrases of searching before booking:

Most of the time, our clients’ budgets can only go so far and so they tend to spend most of their time and effort trying to maximise their spend towards ‘booking moments’ where there is more chance of securing a sale. This results in higher competition, meaning the cost to advertise will also go up. If you were to target phrases at the ‘dreaming moments’ (let’s say for example ‘10 best hotels in south of france’, then the cost for these clicks might be lower, however you will most likely see less ‘success’ in terms of bookings.)

The reality is that focussing on the bottom of the funnel will inevitably lead to increased costs year on year, as more and more advertisers bid higher to try increase or maintain their positions. Similarly, in many industries like travel or B2B, it takes more than one click to get a conversion, and searchers might need to click ads multiple times over multiple weeks before converting, which again drives up your costs.

Current trends

The price you pay for your ads on Google can fluctuate wildly depending on the time of year and how much demand comes and goes in your sector. For example, advertising Easter eggs in the middle of autumn is going to be a whole lot cheaper than doing it in March or April.

Obviously if you’re knowledgeable about your industry, you’ll know when these peaks and troughs are and will manage your budget accordingly to keep spend and revenue in check. However, it’s worthwhile keeping tabs of other trends on, say, social media to pick up on underlying things that affects your audience.

Sticking with the chocolate theme, you may have been quick to spot the growth in popularity of vegan chocolate in recent years and capitalised on this trend whereas others might have overlooked the opportunity. It’s worth reviewing your ads and market fit on an ongoing basis to maximise opportunities in phrases that can gather momentum in time versus those that stay still.

Changes to the SERPs

Google makes nearly 80% of all its revenue each year from ads. These ads are undoubtedly the platform’s most lucrative asset – and this golden goose just keeps on laying more and more eggs. Google being Google is only too happy to keep maximising revenue opportunities, which means increasing advertising costs over time. It also means they change the SERPs regularly to ensure that they pounce on every chance to not only get more PPC clicks, but also reward higher-spending advertisers with more visibility.

Whilst this data from Sparktoro is a few years old now, it does show the shift that Google has managed to engineer towards paid clicks over time, going from roughly 1.8% of all clicks in 2018 to nearly double that in two or so years:

How does Google get more people to click on more ads you might ask? Well, changes such as making ads look more like organic links and introducing more paid for placements make it appear like the objective is to ‘give advertisers more options’, but perhaps closer to the truth is that it has helped to drive more income. These areas which used to be free or pretty cheap are being eroded thanks to Google’s profiteering, meaning ad visibility costs more over time.

Quality of your account management

Whilst it’s very easy to talk about CPC bids to advertise on Google, the often-overlooked part of making advertising spend go further is account structure. The way your account is set up (ad groups, keyword selection, bid structure, landing pages, etc.) all contributes to ‘ad rank’ — the measure of your account's overall 'quality' based on these metrics

Your position in the auction (i.e. the placing of the ad in the SERP) can be greatly affected by the elements above. A major reason why PPC agencies exist is to not only deliver and manage ad spend effectively but also invest the time to set up accounts properly in order to get a boost in your listings.

How does budgeting work with Google Ads costs?

Google Ads offers three key strategies for managing costs. Let’s take a closer look at these to understand how they enable businesses to control advertising spend.

Daily average budgets

Advertisers are able to define their own average ‘comfortable’ spend for campaigns which Google Ads then averages out across a month, spending less on quieter days and slightly more on high-traffic days. Total monthly spend should never exceed the set daily budget multiplied by the average number of days in a month.

Spending limits

These act as your overall budget cap, preventing costs from exceeding the predetermined set amount and ensuring that spend remains within financial constraints.

Bidding

Your bidding strategy determines how much you're willing to pay for each click on your ad. This, along with other factors like ad quality and competition, determines ad placement. Advertisers can choose from several bidding strategies with different goals, such as maximising clicks, conversions or impression share.

Cost breakdown of an example campaign

Different PPC agencies tend to break down their fees in different ways, so it’s worth asking your preferred agency how their own management fee is structured before signing on the dotted line to ensure budgets and goals are in sync.

Here are some examples of management fee frameworks:

Percentage of advertising spend: The percentage tends to reduce as the budget increases and can start from as much as 20% when you spend £1,500, going down to as little as 5% when you’re willing to spend mega bucks.

Hour-based: The agency calculates how long it will take to manage your account based on similar accounts they’ve previously looked after. Most agencies sit in the £90-£120 per hour bracket.

Performance-based: Some agencies favour a results-only model, negotiating a percentage of every sale made through Google Ads. The percentage differs wildly from industry to industry, so it’s impossible to provide an average here.

Want to learn more about how much Google Ads cost in the UK?

The PPC team here at Adido knows pretty much everything there is to know about Google Ads and if there’s two things they can’t stand, it’s when an ad isn’t pulling its weight, or Google is being paid more than it should. Speak to one of our paid advertising gurus today about making your ad budget stretch further and getting more bang for your buck!