When considering the possibility of advertising on Google Ads, one of the first questions that come to mind, if not the first, is how much does Google Ads cost? Is it expensive to advertise on Google Ads? Is there a minimum price requirement?
As Mark Thomson, president of The New York Times, said after receiving the Columnistas de El Mundo prize:
Nobody gets free public.
This is a great phrase that reminds everyone that getting customers will always come at a cost and, therefore, will mean making an investment.
While the overall cost of Google Ads is important, you'll discover that putting a price on advertising through Google isn't just about knowing how much it costs. There are many factors that influence the cost of AdWords, so it’s important to understand them first.
Many companies see marketing or advertising as a cost that they have to try to reduce. As expressed in his book Return on Marketing Investment, Guy R. Powell, CEO and founding partner of ProRelevant Marketing Solutions said:
Everything we spend on marketing should be seen as an investment.
When a company needs to invest in machinery, personnel or automation, there's a certain level of return on each investment project. The same happens with marketing or advertising and, for this reason, should be seen in the same way.
During the last two decades, advertisers have gradually reduced their advertising investment in traditional media (television, newspapers or radio) to allocate a greater part of their budget to online advertising. According to a Statista analysis:
Google accounts for 50 percent of all online advertising revenue
You may have heard many times that online advertising, specifically advertising on Google, costs less than advertising in traditional media, but do you think that the cost really is the reason why companies are deciding to invest in Google Ads?
While it's true that many SMEs have found an affordable channel to publicize their products or services effectively at a relatively low cost through online advertising, so have large companies or multinational businesses. For the latter, whatever Google Ads costs isn't a problem, so it's clear that there's something else behind its popularity. This something is known as a return on investment or ROI.
A Return on Investment (ROI) is an indicator that tells you whether your Google Ads campaign is profitable or not. It's calculated by the difference between the amount of money that it costs to carry out the campaign and the money you get in return for benefits. It basically shows the real effect of the advertising strategy on your business. According to the Google Economic Impact Report:
Advertisers generate an average of $2 in revenue for every dollar spent on Google Ads.
This fact serves to highlight that the cost of your Google Ads campaign is no longer a relevant factor if the benefit you obtain is greater. Thus, when asking how much does Google Ads cost, you must also ask how much can you earn with Google Ads.
The leading statistical company, Statista, offers an analysis of perceived ROI level in different marketing channels according to advertisers from around the world. The ROI of advertising on the search network in Google Ads is perceived as medium or very high by 57 percent of advertisers compared to 19 percent perceived as low.
If both small and large companies are deciding to invest part of their budget in Google Ads, it's because the benefit they get is greater than the cost regardless of how much money they spend on the Google Ads platform.
To calculate the ROI of an Google Ads campaign it's necessary to check the revenue of your ads, subtract the general costs and divide the result among the general costs. The formula would be the following:
For example, suppose you have a product that costs €50/$50 to produce and that’s sold for €100/$100. Thanks to your ads with Google Ads, you sell six units of this product. The total revenue generated by the sales is €600/$600. Now imagine that the Google Ads costs were €200/$200. The ROI would be calculated like this:
Once the calculation is done, you’ll get a negative or positive result. If it's negative, it means that you're investing more money than you earn. If the result is positive, as in the example, you’re on the right track and making money. That being said, you’ll always have to try to improve that ratio.
To know how much Google Ads costs, you have to understand how the platform works. You can find more detailed information here, How Google Ads works.
In summary, the Google Ads system is divided into two different networks:
Search network: This lets you display ads in text format on Google search pages, other Google sites like Google Maps and Google Shopping, and Google search partner websites.
Display network: it allows us to advertise through visual ad formats, such as banners or videos, on Google partner websites - all those who have registered with AdSense - the set of Google sites - Google Finance, Gmail, Blogger and YouTube - and on mobile websites and apps that show Google Ads ads that match your content.
The search network is based on keywords, the words used in a search on Google. This lets you actively reach customers who are looking for a specific product or service. Advertisers define lists of keywords and determine how much they're willing to pay for them.
For example, every time someone searches ‘buy running shoes,’ on Google, Google Ads conducts an auction among the ads of all advertisers who bid on these keywords. Through the auction, Google Ads determines which ads will be displayed and in what order. When someone clicks on one of the ads that Google Ads has decided to display, the advertiser who created it pays a fee.
This is the usual bidding system, known as cost-per-click (CPC). There are also other bid strategies, such as cost per thousand impressions (CPM), designed for branding campaigns in the Google display network. There, advertisers pay when their ad has appeared a thousand times on the screen of their target audience. Then there is cost per acquisition (CPA) which allows you to pay only when a user makes a conversion on your website. For example, you’d pay when a visitor buys a product or fills out a form.
Keep in mind that there are several factors that influence the cost of a campaign. More so, it's not always possible to obtain the desired results with any bid or budget. These are the factors that can determine how much Google Ads costs:
The chosen bid strategy: Each bidding system may have a different cost. The CPA system is the one that usually has a higher cost, but remember, what counts is the return that you obtain.
The chosen keywords: The keywords you define and that trigger your ads can also influence the cost of your Google Ads campaign. The more specific they are (something known as long tail keywords) the less advertisers they’ll be bidding for them. This lack of competition means their cost will be lower. However, if they're too specific, there may not be enough searches for them and your campaign won’t start. To know which words are going to be more profitable, you can use the keyword planner, a free tool that the Google Ads platform provides that shows you the volume of searches the keywords you want to use have, the level of existing competition and an estimate of its cost-per-click, among other features.
Ad optimization: If you create attractive ads for your target audience that offer exactly what your audience is looking for when using a certain keyword, you add relevant ad extensions and have a landing page according to the content of the ad, users will be much more likely to click on your ad. Google Ads will then give them a higher quality level. As a result, Google Ads will reward you with good ad positions and lower bid amounts than your competitors. If you don't have time or the knowledge to optimize your ads, Kolau can help you get it in the easiest and fastest way.
The industry or sector: There are sectors with more competition between advertisers than others. and, therefore, the bidding for necessary keywords to appear on the first page of Google will be higher and will require a greater investment to achieve the desired results. In the chart below you can see what the average cost-per click is by industry.
The country: Studies show that Google Ads cost-per-click also varies by country, with the United Arab Emirates and the United States having the highest CPC and Serbia and Moldova with the lowest CPC. Concerning the Spanish-speaking countries, according to a WordStream study, taking the average CPC of the United States (between $1 and $2) as a reference, both the CPC of Spain and the Mexican CPC are 50 percent lower.
No, there is no minimum investment. However, after years of experience managing Google Ads accounts, it’s become clear that this statement is only valid if the factors that influence the cost (those mentioned in the previous point) and the performance you want to obtain from your campaign are left out of the equation.
Remember, it isn't always possible to obtain the desired results with any bid or budget. However, you shouldn't focus all your attention on the cost of the campaign, but on the return it can yield. Take this example:
There’s an academy that sells online courses and they want to start advertising on the Google Ads search network. If they rely on the statistics provided by WordStream, the average conversion rate of the education sector in the search network is 4.13 percent. With 100 clicks on their ad, they can get 4.13 sales. Therefore, to get a sale, it'd take about 25 clicks on their ad.
If each click costs 1.74€/$1.74, using the average cost-per-click in the education sector according to WordStream as a reference, each sale would mean an investment of €43.5/$43.5. If the online course they sell has a price higher than €43.5/$43.5, the return will be positive and, therefore, advertising through Google Ads will be profitable.
You may have heard about the concepts of outbound and inbound marketing more than once, but do you know the difference between them and what they have to do with the cost of Google Ads? These two concepts emerged simultaneously around 2005 and were coined by Brian Halligan, co-founder and CEO of HubSpot, to explain a new methodology (inbound) to focus marketing campaigns versus more traditional marketing (outbound).
Outbound marketing is based on a push approach, which consists of transmitting an advertising message to an audience that isn't waiting for it and, therefore, isn't prepared to receive it. It's like telling the consumer:
Hi! I'm talking to you and, even if you don't know it, you need what I am selling you.
This would be the case of television and radio advertisements, ads on social media platforms, large billboards or telemarketing, for example.
On the other hand, inbound marketing is based on a pull approach, also called the attraction model. It's the type of marketing that works when the user is looking for a solution,in the form of a product or service, to a problem. This makes them more receptive to relevant afs. In this case, the message must convince this user that your product is the solution to their problem. This is what we get when you advertise with Google Ads.
In the end, the goal of both models is the same: to get the brand to the corresponding target to achieve sales, retain customers and make each dollar invested profitable in order to obtain benefits.
Inbound marketing is a much more effective, measurable, economic and adequate system.
As an example, compare the cost of an outbound telemarketing campaign from an accounting company with the cost of an Google Ads inbound campaign—using Kolau—from the online academy mentioned in the previous point.
As you can see, with Google Ads it's possible to get the same number of customers at a much lower cost, so the return of the campaign can be much higher than using an outbound strategy, such as telemarketing.
Now you know how to calculate how much Google Ads costs. While there's no free marketing strategy, it's possible to get customers at a much lower cost. Your marketing strategy will always require an investment and the key lies in the experimentation and calculation of the return to know if the action will be profitable or not.
With Kolau Small Business get more from AdWords and pay less to AdWords. Kolau’s optimization engine enables advertisers to remain in full control of their account while Kolau automates thir AdWords account optimizing so it gets more for less. Let’s go!